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Exhibit 10.17    
    









AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT  




 

among  




 

UNITED STATES PHARMACEUTICAL GROUP, L.L.C.

and

NATIONSHEALTH HOLDINGS, L.L.C.  




 

and  




 

CAPITALSOURCE FINANCE LLC  








 

Dated as of

June    , 2004  









 
 

REVOLVING CREDIT AGREEMENT
  
  TABLE OF CONTENTS    
    



	 
	 
	 
	Page

	I.	DEFINITIONS	1
	 	1.1	General Terms	1
	

II.	

ADVANCES, PAYMENT AND INTEREST	

2
	 	2.1	The Revolving Facility	2
	 	2.2	The Note; Maturity	4
	 	2.3	Interest	5
	 	2.4	Revolving Facility Disbursements; Requirement to Deliver Borrowing Certificate	6
	 	2.5	Revolving Facility Collections; Repayment; Borrowing Availability and Lockbox	6
	 	2.6	Promise to Pay; Manner of Payment	7
	 	2.7	Repayment of Excess Advances	8
	 	2.8	Payments by Lender	8
	 	2.9	Grant of Security Interest; Collateral	8
	 	2.10	Collateral Administration	9
	 	2.11	Power of Attorney	10
	

III.	

FEES AND OTHER CHARGES	

11
	 	3.1	Commitment Fee	11
	 	3.2	Unused Line Fee	11
	 	3.3	Collateral Management Fee	11
	 	3.4	Computation of Fees; Lawful Limits	12
	 	3.5	Default Rate of Interest	12
	 	3.6	Acknowledgement of Joint and Several Liability	12
	

IV.	

CONDITIONS PRECEDENT	

13
	 	4.1	Conditions to Initial Overadvance on Restatement Date and Closing	13
	 	4.2	Conditions to Each Advance and Overadvance	14
	

V.	

REPRESENTATIONS AND WARRANTIES	

15
	 	5.1	Organization and Authority	15
	 	5.2	Loan Documents	15
	 	5.3	Subsidiaries, Capitalization and Ownership Interests	16
	 	5.4	Properties	16
	 	5.5	Other Agreements	17
	 	5.6	Litigation	17
	 	5.7	Hazardous Materials	17
	 	5.8	Potential Tax Liability; Tax Returns; Governmental Reports	18
	 	5.9	Financial Statements and Reports	18
	 	5.10	Compliance with Law	18
	 	5.11	Intellectual Property	19
	 	5.12	Licenses and Permits; Labor	19
	 	5.13	No Default	19
	 	5.14	Disclosure	19
	 	5.15	Existing Indebtedness; Investments, Guarantees and Certain Contracts	20
	 	5.16	Other Agreements	20
	 	5.17	Insurance	20
	 	5.18	Names; Location of Offices, Records and Collateral	20
	 	5.19	Non-Subordination	20
	 	5.20	Accounts and Inventory	21
	 	5.21	Healthcare	22
	 	 	 	 









	 	5.22	Survival	22
	 	5.23	Merger Documents, HealthTrans Agreement, Wellpoint Agreement and Employment Agreements	22
	

VI.	

AFFIRMATIVE COVENANTS	

23
	 	6.1	Financial Statements, Borrowing Certificate, Financial Reports and Other Information	23
	 	6.2	Payment of Obligations	25
	 	6.3	Conduct of Business and Maintenance of Existence and Assets	26
	 	6.4	Compliance with Legal and Other Obligations	26
	 	6.5	Insurance	26
	 	6.6	True Books	27
	 	6.7	Inspection; Periodic Audits	27
	 	6.8	Further Assurances; Post Closing	27
	 	6.9	Payment of Indebtedness	27
	 	6.10	Lien Searches	27
	 	6.11	Use of Proceeds	28
	 	6.12	Collateral Documents; Security Interest in Collateral	28
	 	6.13	Right of First Refusal	28
	 	6.14	Taxes and Other Charges	29
	 	6.15	Payroll Taxes	30
	 	6.16	Inventory Controls	30
	

VII.	

NEGATIVE COVENANTS	

30
	 	7.1	Financial Covenants	30
	 	7.2	Permitted Indebtedness	30
	 	7.3	Permitted Liens	31
	 	7.4	Investments; New Facilities or Collateral; Subsidiaries	32
	 	7.5	Dividends; Redemptions	32
	 	7.6	Transactions with Affiliates	32
	 	7.7	Charter Documents; Fiscal Year; Name; Jurisdiction of Organization; Dissolution; Use of Proceeds	33
	 	7.8	Truth of Statements	33
	 	7.9	IRS Form 8821	33
	 	7.10	Transfer of Assets	33
	 	7.11	Payment on Permitted Subordinated Debt	34
	 	7.12	Merger Documents	34
	 	7.13	HealthTrans Agreement and Wellpoint Agreement	34
	 	7.14	NationsHealth Supply L.L.C	34
	

VIII.	

EVENTS OF DEFAULT	

35
	

IX.	

RIGHTS AND REMEDIES AFTER DEFAULT	

37
	 	9.1	Rights and Remedies	37
	 	9.2	Application of Proceeds	38
	 	9.3	Rights of Lender to Appoint Receiver	39
	 	9.4	Rights and Remedies not Exclusive	39
	

X.	

WAIVERS AND JUDICIAL PROCEEDINGS	

39
	 	10.1	Waivers	39
	 	10.2	Delay; No Waiver of Defaults	40
	 	10.3	Jury Waiver	40
	 	10.4	Cooperation in Discovery and Litigation	40
	

XI.	

EFFECTIVE DATE AND TERMINATION	

41
	 	11.1	Termination and Effective Date Thereof	41
	 	 	 	 









	 	11.2	Survival	41
	

XII.	

MISCELLANEOUS	

42
	 	12.1	Governing Law; Jurisdiction; Service of Process; Venue	42
	 	12.2	Successors and Assigns; Participations; New Lenders	42
	 	12.3	Application of Payments	43
	 	12.4	Indemnity	43
	 	12.5	Notice	43
	 	12.6	Severability; Captions; Counterparts; Facsimile Signatures	44
	 	12.7	Expenses	44
	 	12.8	Entire Agreement	45
	 	12.9	Lender Approvals	45
	 	12.10	Publicity	45
	 	12.11	Release of Lender	45
	 	12.12	Agent	46
	 	ANNEX I	1
	 	FINANCIAL COVENANTS	1
	 	1)	Minimum EBITDA	1
	 	2)	Fixed Charge Coverage Ratio (EBITDA/Fixed Charges)	1
	 	3)	Cash Velocity	2
	 	4)	Minimum Liquidity and Working Capital	2
	 	APPENDIX A	1
	 	DEFINITIONS	1











 
 

Execution Document    
    


 
 

AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT    
    


        THIS AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT (the  "Agreement") dated
as of June            , 2004, is entered into among UNITED STATES PHARMACEUTICAL GROUP, L.L.C. d/b/a
NATIONSHEALTH, a Delaware limited liability company and NATIONSHEALTH HOLDINGS, L.L.C., a Florida limited liability company
(jointly and severally, the "Borrower") and CAPITALSOURCE FINANCE LLC, a Delaware limited liability
company (the "Lender"). 


        WHEREAS,
pursuant to a certain Revolving Credit and Security Agreement by and between Borrower and Lender dated as of April 30, 2004 (the "Original Credit
Agreement"), Lender made available to Borrower a revolving credit facility (the "Revolving Facility") in a maximum principal
amount at any time outstanding of up to Ten Million and 00/100 Dollars ($10,000,000.00) (the "Facility Cap"), the proceeds of which shall be used by
Borrower (i) as a provider of health care services, (ii) as a wholesaler, retailer and provider of medical supplies, (iii) for the generation of receivables/inventory, (iv) for the refinancing of
existing indebtedness, (v) for its working capital needs thereafter and (vi) for payments to Lender hereunder upon and subject to the conditions set forth in the Original Credit Agreement; and 


        WHEREAS,
Borrower has requested that Lender amend and restate the conditions of the Original Credit Agreement to make available to Borrower a separate overadvance facility (the
"Overadvance Facility") pursuant to which Borrower may request advances of up to Five Million and 00/100 Dollars ($5,000,000.00) (the
"Overadvance Facility Cap") and to permit Borrower to include its inventory within the Borrowing Base (as hereinafter defined) for the Revolving
Facility; and 


        WHEREAS,
Lender is willing to so amend and restate the Original Credit Agreement to make the Overadvance Facility available to Borrower and to permit the inclusion of inventory within
the Borrowing Base upon the terms and subject to the conditions set forth herein. 



        NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which hereby are acknowledged, Borrower and Lender hereby
agree that the Original Credit Agreement shall be amended and restated as follows: 


I.    DEFINITIONS  



 1.1    General Terms  




        For purposes of this Agreement, in addition to the definitions above and elsewhere in this Agreement, the terms listed in  Appendix A
hereto shall have the meanings given such terms in Appendix A, which is
incorporated herein and made a part hereof. All capitalized terms used which are not specifically defined shall have meanings provided in Article 9 of the UCC in effect on the date hereof to
the extent the same are used or defined therein. Unless otherwise specified herein or in Appendix A, any agreement or contract referred to herein
or in Appendix A shall mean such agreement as modified, amended or supplemented from time to time. Unless otherwise specified, as used in the
Loan Documents or in any certificate, report, instrument or other document made or delivered pursuant to any of the Loan Documents, all accounting terms not defined in Appendix A or elsewhere in this
Agreement shall have the meanings given to such terms in and shall be interpreted in accordance with GAAP. 


II.    ADVANCES, PAYMENT AND INTEREST  



 2.1    The Revolving Facility  




        (a)   Subject
to the provisions of this Agreement, Lender shall make Advances to Borrower under the Revolving Facility from time to time during the Term,  provided that, notwithstanding any other 







 

provision
of this Agreement, the aggregate amount of all Advances at any one time outstanding under the Revolving Facility shall not exceed either of (a) the Facility Cap, or (b) the
Availability, plus such additional amounts that Lender may elect to advance to Borrower in its sole discretion such that the total outstanding Advances at any one time are not less than the Minimum
Balance. The Revolving Facility is a revolving credit facility, which may be drawn, repaid and redrawn, from time to time as permitted under this Agreement. Any determination as to whether there is
Availability for Advances shall be made by Lender in its sole discretion and, absent demonstrable error, is final and binding upon Borrower. Unless otherwise permitted by Lender, each Advance shall be
in an amount of at least $1,000. Subject to the provisions of this Agreement, Borrower may request Advances under the Revolving Facility up to and including the value, in U.S. Dollars, of the  sum of
(i) Eighty-Five percent (85%) of the Borrowing Base for Eligible Billed Receivables, (ii) Sixty percent (60%) of the Borrowing Base
for Eligible Unbilled Receivables, and (iii) as determined by Lender in its sole discretion following the completion of the Inventory Field Examination, either (a) Fifty percent (50%) of
the Borrowing Base for Eligible Finished Goods Inventory valued at the lower of cost basis or market value and (b) Eighty-Five percent (85%) of the Borrowing Base for Eligible Inventory valued
at orderly liquidation value, minus, if applicable, amounts adjusted or reserved pursuant to this Agreement (such calculated amount being referred to
herein as the "Availability"); provided, however, that at no time shall more than One Million and 00/100
($1,000,000.00) of the Availability be comprised of Eligible Inventory. Advances under the Revolving Facility automatically shall be made for the payment of interest on the Notes and other
Obligations, including Overadvances, on the date when due to the extent available and as provided for herein. Notwithstanding any provision of this subsection (a) to the contrary, Borrower
shall not be permitted to include Eligible Inventory in the Availability unless and until Lender has completed and reviewed an independent appraisal and field examination of Borrower's Inventory at
the expense of Borrower and the results of which are satisfactory to Lender in its sole discretion (the "Inventory Field Examination"). 



        (b)   On
the Restatement Date, Lender shall make the Overadvance Facility available to Borrower pursuant to which Borrower may
request advances ("Overadvances") from time to time during the Term of up to the Overadvance Facility Cap as follows: 



        (i)    As
long as no Default or Event of Default shall have occurred and be continuing, Borrower shall be permitted to request Overadvances commencing on the Restatement Date
and continuing through July 31, 2004 in an amount not to exceed One Million Two Hundred Fifty Thousand and 00/100 Dollars ($1,250,000.00) in the aggregate (each, an "Initial
Overadvance" and, collectively, "Initial Overadvances"); and 



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        (ii)   As
long as no Default or Event of Default shall have occurred and be continuing, commencing March 1, 2005 and continuing during the Term, Borrower shall be permitted to
request subsequent Overadvances (each, a "Subsequent Overadvance" and, collectively, "Subsequent
Overadvances") in amounts determined as follows by reference to Borrower's EBITDA as of the end of the most recent Test Period prior to the date of the requested Subsequent
Overadvance: 



	Test Period Ending
 
	 	EBITDA
	 	Amount of Subsequent Overadvance

	January 31, 2005 through

June 30, 2005	 	Less than $6,000,000

Greater than or equal to $6,000,000 but less than $6,250,000

Greater than or equal to $6,250,000 but less than $6,500,000

Greater than or equal to $6,500,000 but less than $7,000,000

Greater than or equal to $7,000,000 but less than $7,500,000

Greater than or equal to $7,500,000	 	$0.00

Not to exceed $1,000,000



Not to exceed $2,000,000



Not to exceed $3,000,000



Not to exceed $4,000,000



Not to exceed $5,000,000
	

July 31, 2005 through

December 31, 2005	
 	

Less than $7,500,000

Greater than or equal to $7,500,000 but less than $7,700,000

Greater than or equal to $7,700,000 but less than $8,000,000

Greater than or equal to $8,000,000 but less than $8,250,000

Greater than or equal to $8,250,000 but less than $8,500,000

Greater than or equal to $8,500,000	
 	

$0.00

Not to exceed $1,000,000



Not to exceed $2,000,000



Not to exceed $3,000,000



Not to exceed $4,000,000



Not to exceed $5,000,000
	

January 31, 2006 through

December 31, 2006	
 	

Less than $9,000,000

Greater than or equal to $9,000,000	
 	

$0.00

Not to exceed $5,000,000
	

January 31, 2007 through

December 31, 2007	
 	

Less than $10,000,000

Greater than or equal to $10,000,000	
 	

$0.00

Not to exceed $5,000,000





        At
no time shall Overadvances exceed the Overadvance Facility Cap. Except as otherwise noted herein, outstanding Overadvances, and all principal, interest, fees and other costs and
expenses relating to the Overadvances, shall be treated as additional Obligations under this Agreement and the other Loan Documents. Each Overadvance shall be in an amount of at least $100,000.
Commencing March 1, 2005 in the case of Subsequent Overadvances only, the Overadvance Facility shall be a revolving credit 


3







 



facility,
which may be drawn, repaid and redrawn, from time to time as permitted under this Agreement. 


        (c)   Lender
has established the above-referenced advance rates for Availability and, in its sole credit judgment, may further adjust the Availability and such advance rates
by applying percentages (known as "liquidity factors") to Eligible Receivables by payor class based upon Borrower's actual recent collection history for each such payor class (i.e., Medicare,
Medicaid, commercial insurance, etc.) and to Eligible Inventory in a manner consistent with Lender's underwriting practices and procedures, including without limitation Lender's review and analysis
of, among other things, Borrower's historical returns, rebates, discounts, credits and allowances (collectively, the "Dilution Items"). Such liquidity
factors and the advance rates for Availability may be adjusted by Lender throughout the Term as warranted by Lender's underwriting practices and procedures in its sole credit judgment. Also, Lender
shall have the right to establish from time to time, in its sole credit judgment, reserves against the Borrowing Base, which reserves shall have the effect of reducing the amounts otherwise eligible
to be disbursed to Borrower under the Revolving Facility pursuant to this Agreement. 



 2.2    The Notes; Maturity  




        (a)   (i)    All
Advances under the Revolving Facility shall be evidenced by the Revolving Note, payable to the order of Lender, duly executed and delivered by
Borrower and dated the Closing Date, evidencing the aggregate indebtedness of Borrower to Lender resulting from Advances under the Revolving Facility, from time to time. Lender hereby is authorized,
but is not obligated, to enter the amount of each Advance under the Revolving Facility and the amount of each payment or prepayment of principal or interest thereon in the appropriate spaces on the
reverse of or on an attachment to the Revolving Note. Lender will account to Borrower monthly with a statement of Advances under the Revolving Facility and charges and payments made pursuant to this
Agreement, and in the absence of manifest error, such accounting rendered by Lender shall be deemed final, binding and conclusive unless Lender is notified by Borrower in writing to the contrary
within 30 calendar days of Receipt of each accounting, which notice shall be deemed an objection only to items specifically objected to therein. 


        (ii)   All
Overadvances shall be evidenced by the Overadvance Note, payable to the order of Lender, duly executed and delivered by Borrower and dated the Restatement Date,
evidencing the aggregate indebtedness of Borrower to Lender resulting from Overadvances under the Overadvance Facility, from time to time. Lender hereby is authorized, but is not obligated, to enter
the amount of each Overadvance and the amount of each payment or prepayment of principal or interest thereon in the appropriate spaces on the reverse of or on an attachment to the Overadvance Note.
Lender will account to Borrower monthly with a statement of Overadances and charges and payments made pursuant to this Agreement, and in the absence of manifest error, such accounting rendered by
Lender shall be deemed final, binding and conclusive unless Lender is notified by Borrower in writing to the contrary within 30 calendar days of Receipt of each accounting, which notice shall be
deemed an objection only to items specifically objected to therein. 


        (b)   All
amounts outstanding under the Revolving Note and other Obligations relating to Advances shall be due and payable in full, if not earlier in accordance with this
Agreement, on the earlier of (i) the occurrence and continuance of an Event of Default if required pursuant hereto or Lender's demand upon the occurrence and continuance of an Event of Default, and
(ii) the last day of the Term (such earlier date being the "Revolving Facility Maturity Date"). 


        (c)   All
amounts outstanding under the Overadvance Note and other Obligations relating to the Initial Overadvances shall be due and payable in full, if not earlier in
accordance with this Agreement, on the earlier of (i) the occurrence and continuance of an Event of Default if required pursuant hereto or Lender's demand upon the occurrence and continuance of an
Event of Default, (ii) immediately 


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upon
the closing and out of the proceeds of the Merger, or (iii) twelve (12) months from the Restatement Date (such earlier date being the "Initial Overadvance Maturity
Date"). All amounts outstanding under the Overadvance Note and other Obligations relating to each Subsequent Overadvance shall be due and payable in full, if not earlier in
accordance with this Agreement, on the earlier of (i) the occurrence and continuance of an Event of Default if required pursuant hereto or Lender's demand upon the occurrence and continuance of an
Event of Default, (ii) twelve (12) months from the date of such Subsequent Overadvance or (iii) and the last day of the Term (such earlier date, in the case of each Subsequent Overadvance, being the  "Subsequent Overadvance
Maturity Date"). 



 2.3    Interest  




        (a)   Interest
on outstanding Advances under the Revolving Note shall be payable monthly in arrears on the first day of each calendar month at an annual rate of Prime Rate
plus 2.50%, provided, however, that, notwithstanding any provision of any Loan Document, for the purpose of calculating interest hereunder, the interest
rate shall be not less than 4.0%, in each case calculated on the basis of a 360-day year and for the actual number of calendar days elapsed in each interest calculation period. Interest accrued on
each Advance under the Revolving Note shall be due and payable on the first day of each calendar month, in accordance with the procedures provided for in  Section 2.6, commencing May 1, 2004,
and continuing until the later of the expiration of the Term and the full performance and irrevocable
payment in full in cash of the Obligations relating to Advances and termination of this Agreement. 



        (b)   Interest
on outstanding Overadvances under the Overadvance Note shall be payable monthly in arrears on the first day of each calendar month at an annual rate of Prime
Rate plus 4.50%, provided, however, that, notwithstanding any provision of any Loan Document, for the purpose of calculating interest hereunder, the Prime Rate shall not be less that 4.0%, in each
case calculated on the basis of a 360-day year and for the actual number of calendar days lapsed in each interest calculation period. Interest accrued on each Overadvance under the Overadvance Note
shall be due and payable on the first day of each calendar month, in accordance with the procedures provided for in Section 2.5 and  Section 2.6,
commencing July 1, 2004, and continuing until the later of the Initial Overadvance Maturity Date (in the case of the Initial
Overadvances), the Subsequent Overadvance Maturity Date (in the case of Subsequent Overadvances) and, in the case of all Overadvances, the full performance and irrevocable payment in full in cash of
the Obligations relating to the Overadvances and termination of this Agreement. 



 2.4    Revolving Facility Disbursements; Requirement to Deliver Borrowing Certificate  




        So long as no Default or Event of Default shall have occurred and be continuing, Borrower may give Lender irrevocable written notice requesting (i) an
Advance under the Revolving Facility or (ii) an Overadvance under the Overadvance Facility by delivering to Lender not later than 11:00 a.m. (Eastern Standard Time) at least one but not
more than four Business Days before the proposed borrowing date of such requested Advance or Overadvance (the "Borrowing Date"), a completed Borrowing
Certificate and relevant supporting documentation satisfactory to Lender, which shall (i) specify the proposed Borrowing Date of such Advance or Overadvance which shall be a Business Day,
(ii) specify the principal amount of such requested Advance or Overadvance, (iii) certify the matters contained in Section 4.2,
(iv), in the case of an Advance, specify the amount of any Medicare or Medicaid recoupments and/or recoupments of any third-party payor being sought, requested or claimed, or, to Borrower's knowledge,
threatened against Borrower or Borrower's Affiliates, and (v), in the case of a Subsequent Overadvance, certify Borrower's EBITDA for the most recent Test Period and provide information to support
such calculation. Each time a request for an Advance is made, and, in any event and regardless of whether an Advance is being requested, on Tuesday of each week during the Term (and so long as a
Default or Event of Default exist, more frequently if Lender shall so request) until 


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the
Obligations are indefeasibly paid in cash in full and this Agreement is terminated, Borrower shall deliver to Lender a Borrowing Certificate accompanied by a separate detailed aging and
categorizing of Borrower's accounts receivable and accounts payable and such other supporting documentation with respect to the figures and information in the Borrowing Certificate as Lender shall
reasonably request from a credit or security perspective or otherwise. On each Borrowing Date, Borrower irrevocably authorizes Lender to disburse the proceeds of the requested Advance or Overadvance
to the appropriate Borrower's account(s) as set forth on Schedule 2.4, in all cases for credit to the appropriate Borrower (or to such other
account as to which the appropriate Borrower shall instruct Lender) via Federal funds wire transfer no later than 4:00 p.m. (Eastern Standard Time). Lender may, in its sole discretion, also may
make additional Advances to Borrower without the requirement of a Borrowing Certificate ("Automatic Advance"). The amount of such Automatic Advances
shall be that amount, if any, necessary to make the total outstanding Advances at any one time outstanding equal to $2,500,000.00 or such lesser amount as Lender may elect to advance in its sole
discretion (in either case, the "Minimum Balance"). 



 2.5    Revolving Facility Collections; Repayment; Borrowing Availability and Lockbox  




        Each Borrower shall maintain one or more lockbox accounts (individually and collectively, the "Lockbox Account")
with one or more banks acceptable to Lender (each, a "Lockbox Bank"), and shall execute with each Lockbox Bank one or more agreements acceptable to
Lender (individually and collectively, the "Lockbox Agreement"), and such other agreements related thereto as Lender may require. Each Borrower shall
ensure that all collections of their respective Accounts and all other cash payments received by any Borrower are paid and delivered directly from Account Debtors and other Persons into the
appropriate Lockbox Account. The Lockbox Agreements shall provide that the Lockbox Banks will transfer on the same Business Day all funds paid into the Lockbox Accounts into a depository account or
accounts maintained by Lender or an Affiliate of Lender at such bank as Lender may communicate to Borrower and the applicable Lockbox Bank from time to time in accordance with the Lockbox Agreement
(the "Concentration Account"), except, with respect only to Accounts payable by Medicaid/Medicare Account Debtors, as instructed by the applicable
Borrower to whom such Accounts are payable as permitted pursuant to the applicable Lockbox Agreement. Notwithstanding and without limiting any other provision of any Loan Document, Lender shall apply,
on a daily basis, all funds transferred into the Concentration Account pursuant to the Lockbox Agreement and this Section 2.5 in such order and
manner as determined by Lender. To the extent that any Accounts are collected by any Borrower or any other cash payments received by any Borrower are not sent directly to the appropriate Lockbox
Account but are received by any Borrower or any of their Affiliates, such collections and proceeds shall be held in trust for the benefit of Lender and immediately remitted (and in any event within
two (2) Business Days), in the form received, to the appropriate Lockbox Account for immediate transfer to the Concentration Account. Borrower acknowledges and agrees that compliance with the terms of
this Section 2.5 is an essential term of this Agreement, and that, in addition to and notwithstanding any other rights Lender may have hereunder,
under any other Loan Document, under applicable law or at equity, upon each and every failure by any Borrower or any of their Affiliates to comply with any such terms Lender shall be entitled to
assess a non-compliance fee which shall operate to increase the Applicable Rate by two percent (2.0%) per annum during any period of non-compliance, whether or not a Default or an Event of Default
occurs or is declared, provided that nothing shall prevent Lender from considering any failure to comply with the terms of this Section 2.5 to be a
Default or an Event of Default. All funds transferred to the Concentration Account for application to the Obligations under the Revolving Facility shall be applied to reduce the Obligations under the
Revolving Facility, but, for purposes of calculating interest hereunder, shall be subject to a five (5) Business Day clearance period. If as the result of collections of Accounts and/or any
other cash payments received by any Borrower pursuant to this Section 2.5 a credit balance exists with respect to the Concentration Account, such
credit balance shall not accrue interest in favor of a 


6







 

Borrower,
but shall be available to Borrower upon Borrower's written request. If applicable, at any time prior to the execution of all or any of the Lockbox Agreements and operation of all or any of
the Lockbox Accounts, each Borrower and their Affiliates shall direct all collections or proceeds it receives on Accounts or from other Collateral to the accounts(s) and in the manner specified by
Lender in its sole discretion. 



 2.6    Promise to Pay; Manner of Payment  




        Borrower absolutely and unconditionally promises to pay principal, interest and all other amounts payable hereunder, or under any other Loan Document, without any
right of rescission and without any deduction whatsoever, including any deduction for any setoff, counterclaim or recoupment, and notwithstanding any damage to, defects in or destruction of the
Collateral or any other event, including obsolescence of any property or improvements. All payments made by Borrower (other than payments automatically paid through Advances under the Revolving
Facility as provided herein), shall be made only by wire transfer on the date when due, without offset or counterclaim, in U.S. Dollars, in immediately available funds to such account as may be
indicated in writing by Lender to Borrower from time to time. Any such payment received after 2:00 p.m. (Eastern Standard Time) on the date when due shall be deemed received on the following
Business Day. Whenever any payment hereunder shall be stated to be due or shall become due and payable on a day other than a Business Day, the due date thereof shall be extended to, and such payment
shall be made on, the next succeeding Business Day, and such extension of time in such case shall be included in the computation of payment of any interest (at the interest rate then in effect during
such extension) and/or fees, as the case may be. 


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 2.7    Repayment of Excess Advances  




        Any balance of Advances under the Revolving Facility outstanding at any time in excess of the lesser of the Facility Cap or the Availability shall be immediately
due and payable by Borrower without the necessity of any demand, at the Payment Office, whether or not a Default or Event of Default has occurred or is continuing and shall be paid in the manner
specified in Section 2.6.



 2.8    Payments by Lender  




        Should any amount required to be paid under any Loan Document be unpaid, such amount may be paid by Lender, which payment shall be deemed a request for an Advance
under the Revolving Facility as of the date such payment is due, and Borrower irrevocably authorizes disbursement of any such funds to Lender by way of direct payment of the relevant amount, interest
or Obligations. No payment or prepayment of any amount by Lender or any other Person shall entitle any Person to be subrogated to the rights of Lender under any Loan Document unless and until the
Obligations have been fully performed and paid irrevocably in cash and this Agreement has been terminated. Any sums expended by Lender as a result of any Borrower's or any Guarantor's failure to pay,
perform or comply with any Loan Document or any of the Obligations may be charged to Borrower's account as an Advance under the Revolving Facility and added to the Obligations. 



 2.9    Grant of Security Interest; Collateral  




        (a)   To
secure the payment and performance of the Obligations, each Borrower hereby grants to Lender a continuing security interest in and Lien upon, and pledges to Lender,
all of its right, title and interest in and to the following (collectively and each individually, the "Collateral"), which security interest is intended
to be a first priority security interest: 



        (i)    all
of such Borrower's tangible personal property, including without limitation all present and future Inventory and Equipment (including items of equipment which are or
become Fixtures), now owned or hereafter acquired; 


        (ii)   all
of such Borrower's intangible personal property, including without limitation all present and future Accounts, contract rights, Permits, General Intangibles,
Chattel Paper, Documents, Instruments, Deposit Accounts, Investment Property, Letter-of-Credit Rights, Supporting Obligations, rights to the payment of money or other forms of consideration of any
kind, tax refunds, insurance proceeds, now owned or hereafter acquired, and all intangible and tangible personal property relating to or arising out of any of the foregoing; 


        (iii)  all
of such Borrower's present and future Government Contracts and rights thereunder and the related Government Accounts and proceeds thereof, now or hereafter owned
or acquired by such Borrower; provided, however, that Lender shall not have a security interest in any rights under any Government Contract of such
Borrower or in the related Government Account where the taking of such security interest is a violation of an express prohibition contained in the Government Contract (for purposes of this limitation,
the fact that a Government Contract is subject to, or otherwise refers to, Title 31, § 203 or Title 41, § 15 of the United States Code shall not be deemed an
express prohibition against assignment thereof) or is prohibited by applicable law, unless in any case consent is otherwise validly obtained; and 



        (iv)  any
and all additions and accessions to any of the foregoing, and any and all replacements, products and proceeds (including insurance proceeds) of any of the
foregoing. 




        (b)   Notwithstanding
the foregoing provisions of this Section 2.9, such grant of a security interest shall not extend
to, and the term "Collateral" shall not include, any General Intangibles of Borrower to the extent that (i) such General Intangibles are not assignable or capable of being encumbered as a matter of
law or under the terms of any license or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable law) without the consent of the
licensor thereof or other applicable party thereto, and (ii) such consent has not been obtained; 


2







 

 provided, however, that the foregoing grant of a security interest shall extend to, and the term "Collateral" shall include, each of the following: (a) any General
Intangible which is in the nature of an Account or a right to the payment of money or a proceed of, or otherwise related to the enforcement or collection of, any Account or right to the payment of
money, or goods which are the subject of any Account or right to the payment of money, (b) any and all proceeds of any General Intangible that is otherwise excluded to the extent that the
assignment, pledge or encumbrance of such proceeds is not so restricted, and (c) upon obtaining the consent of any such licensor or other applicable party with respect to any such otherwise
excluded General Intangible, such General Intangible as well as any and all proceeds thereof that might theretofore have been excluded from such grant of a security interest and from the term
"Collateral." 


        (c)   Upon
the execution and delivery of this Agreement, and upon the proper filing of the necessary financing statements, recordation of the Collateral Patent, Trademark and
Copyright Assignment in the United States Patent and Trademark Office and/or the United States Copyright Office without any further action, Lender will have a good, valid and perfected first priority
Lien and security interest in the Collateral, subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Liens. No financing statement relating
to any of the Collateral is on file in any public office except those (i) on behalf of Lender, (ii) in connection with Permitted Liens and/or (iii) those being terminated. 



 2.10    Collateral Administration  




        (a)   All
Collateral (except Deposit Accounts) will at all times be kept by Borrower at the locations set forth on  Schedule 5.18B hereto and shall not, without thirty (30) calendar days prior written notice
to Lender, be moved therefrom unless Lender has
entered into the necessary documents to perfect and enforce its security interest therein at such new location, and in any case shall not be moved outside the continental United States. 


        (b)   Borrower
shall keep accurate and complete records of its Accounts and all payments and collections thereon and shall submit such records to Lender on such periodic bases
as Lender may request. In addition, if Accounts of Borrower in an aggregate face amount in excess of $30,000 become ineligible because they fall within one of the specified categories of ineligibility
set forth in the definition of Eligible Receivables, Borrower shall notify Lender of such occurrence on the first Business Day following such occurrence and the Borrowing Base shall thereupon be
adjusted to reflect such occurrence. Following the occurrence and during the continuance of an Event of Default, if requested by Lender, Borrower shall execute and deliver to Lender formal written
assignments (or, in the case of Medicaid/Medicare Account Debtors, documents necessary to comply with the Federal Assignment of Claims Act) of all of its Accounts weekly or daily as Lender may
request, including all Accounts created since the date of the last assignment, together with copies of claims, invoices and/or other information related thereto. To the extent that collections from
such assigned accounts exceed the amount of the Obligations, such excess amount shall not accrue interest in favor of Borrower, but shall be available to Borrower upon Borrower's written request. 


        (c)   Following
an occurrence or during the continuance of an Event of Default, any of Lender's officers, employees, representatives or agents shall have the right, at any
time during normal business hours, in the name of Lender, any designee of Lender or Borrower, to verify the validity, amount or any other matter relating to any Accounts or Inventory of Borrower.
Borrower shall cooperate fully with Lender in an effort to facilitate and promptly conclude such verification process. 



        (d)   To
expedite collection, Borrower shall endeavor in the first instance to make collection of its Accounts for Lender. Lender shall have the right at all times after the
occurrence and during the continuance of an Event of Default to notify (i) Account Debtors owing Accounts to Borrower other than Medicaid/Medicare Account Debtors that their Accounts have been
assigned to Lender and to collect such Accounts directly in its own name and to charge collection costs and expenses, including 


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reasonable
attorney's fees, to Borrower, and (ii) Medicaid/Medicare Account Debtors that Borrower has waived any and all defenses and counterclaims it may have or could interpose in any such action or
procedure brought by Lender to obtain a court order recognizing the collateral assignment or security interest and lien of Lender in and to any Account or other Collateral and that Lender is seeking
or may seek to obtain a court order recognizing the collateral assignment or security interest and lien of Lender in and to all Accounts and other Collateral payable by Medicaid/Medicare Account
Debtors. 


        (e)   As
and when determined by Lender in its sole discretion but not more often than four (4) times per year prior to the occurrence and continuance of an Event of Default,
Lender will perform the searches described in clauses (i) and (ii) below against Borrower and Guarantors (the results of which are to be consistent with Borrower's representations and
warranties under this Agreement), all at Borrower's expense: (i) UCC searches with the Secretary of State of the jurisdiction of organization of each Borrower and Guarantor and the Secretary of
State and local filing offices of each jurisdiction where Borrower and/or any Guarantors maintain their respective executive offices, a place of business or assets; (ii) lien searches with the
United States Patent and Trademark Office and the United States Copyright Office; and (iii) judgment, federal tax lien and corporate and partnership tax lien searches, in each jurisdiction
searched under clause (i) above. 


        (f)    Borrower
(i) shall provide prompt written notice to its current bank to transfer all items, collections and remittances to the Concentration Account, (ii) shall
provide prompt written notice to each Account Debtor (other than Medicaid/Medicare Account Debtors) that Lender has been granted a lien and security interest in, upon and to all Accounts applicable to
such Account Debtor and shall direct each Account Debtor to make payments to the appropriate Lockbox Account, and Borrower hereby authorizes Lender, upon any failure to send such notices and
directions within ten (10) calendar days after the date of this Agreement (or ten (10) calendar days after the Person becomes an Account Debtor), to send any and all similar notices and
directions to such Account Debtors, and (iii) shall do anything further that may be lawfully required by Lender to create and perfect Lender's lien on any collateral and effectuate the
intentions of the Loan Documents. At Lender's request, Borrower shall immediately deliver or make arrangements to deliver to Lender all items for which Lender must receive possession to obtain a
perfected security interest and all notes, certificates, and documents of title, Chattel Paper, warehouse receipts, Instruments, and any other similar instruments constituting Collateral. 



 2.11    Power of Attorney  




        Lender is hereby irrevocably made, constituted and appointed the true and lawful attorney for Borrower (without requiring Lender to act as such) with full power
of substitution to do the following: (i) endorse the name of any such Person upon any and all checks, drafts, money orders, and other instruments for the payment of money that are payable to
such Person and constitute collections on its or their Accounts; (ii) execute in the name of such Person any financing statements, schedules, assignments, instruments, documents, and statements
that it is or they or are obligated to give Lender under any of the Loan Documents; and (iii) do such other and further acts and deeds in the name of such Person that Lender may deem necessary
or desirable to enforce any Account or other Collateral or to perfect Lender's security interest or lien in any Collateral. In addition, if any such Person breaches its obligation hereunder to direct
payments of Accounts or the proceeds of any other Collateral to the appropriate Lockbox Account, Lender, as the irrevocably made, constituted and appointed true and lawful attorney for such Person
pursuant to this paragraph, may, by the signature or other act of any of Lender's officers or authorized signatories (without requiring any of them to do so), direct any federal, state or private
payor or fiscal intermediary to pay proceeds of Accounts or any other Collateral to the appropriate Lockbox Account. 


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III.    FEES AND OTHER CHARGES;  



 3.1    Commitment Fee, Funding Fees and Finance Fees  




        (a)   On
the Closing Date, Borrower paid to Lender 1.0% of the Facility Cap as a non-refundable commitment fee. On or before the Restatement Date, Borrower shall pay to Lender
1.0% of the Overadvance Facility Cap as a nonrefundable commitment fee. 


        (b)   Borrower
shall pay to Lender Twenty Five Thousand and 00/100 Dollars ($25,000.00) for each Five Hundred Thousand and 00/100 Dollars ($500,000.00) or fraction thereof
advanced to Borrower under the Overadvance Facility as a funding fee, which shall be deemed earned by Lender upon funding; provided, however, that the funding fee shall not exceed in the aggregate Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000) The funding fee relating to the Initial Overadvances or each Subsequent Overadvance, as appropriate, shall be payable, if not earlier in accordance
with this Agreement, on the Initial Overadvance Maturity Date, in the case of the funding fee payable in respect of the Initial Overadvances, and on the Subsequent Overadvance Maturity Date, in the
case of each Subsequent Overadvance. 


        (c)   Borrower
shall pay to Lender an equity participation fee in an amount and at the times set forth in the Equity Participation Fee Agreement. 



 3.2    Unused Line Fee  




        Borrower shall pay to Lender monthly an unused line fee (the "Unused Line Fee") in an amount equal to 0.04167%
(per month) of the difference derived by subtracting (i) the daily average amount of the balances under the Revolving Facility outstanding during the preceding month, from (ii) the Facility Cap. The
Unused Line Fee shall be payable monthly in arrears on the first day of each successive calendar month (starting with the month in which the Closing Date occurs). 



 3.3    Collateral Management Fee  




        Borrower shall pay Lender as additional interest a monthly collateral management fee (the "Collateral Management
Fee") equal to 0.0833% per month calculated on the basis of the daily average amount of the balances under the Revolving Facility and the Overadvance Facility outstanding
during the preceding month. The Collateral Management Fee shall be payable monthly in arrears on the first day of each successive calendar month (starting with the month in which the Closing Date
occurs in the case of the Revolving Facility, and the month in which the Restatement Date occurs in the case of the Overadvance Facility). 



 3.4    Computation of Fees; Lawful Limits  




        All fees hereunder shall be computed on the basis of a year of 360 days and for the actual number of days elapsed in each calculation period, as applicable. In no
contingency or event whatsoever, whether by reason of acceleration or otherwise, shall the interest and other charges paid or agreed to be paid to Lender for the use, forbearance or detention of money
hereunder exceed the maximum rate permissible under applicable law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. If, due to any circumstance
whatsoever, fulfillment of any provision hereof, at the time performance of such provision shall be due, shall exceed any such limit, then, the obligation to be so fulfilled shall be reduced to such
lawful limit, and, if Lender shall have received interest or any other charges of any kind which might be deemed to be interest under applicable law in excess of the maximum lawful rate, then such
excess shall be applied first to any unpaid fees and charges hereunder, then to unpaid principal balance owed by Borrower hereunder, and if the then remaining excess interest is greater than the
previously unpaid principal balance, Lender shall promptly refund such excess amount to Borrower and the provisions hereof shall be deemed amended to provide for such permissible rate. The terms and
provisions of this Section 3.4 shall control to the extent any other provision of any Loan Document is inconsistent herewith. 


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 3.5    Default Rate of Interest  




        Upon the occurrence and during the continuation of an Event of Default, the Applicable Rate of interest in effect at such time with respect to the Obligations
shall be increased by 3.0% per annum (the "Default Rate"). 



 3.6    Acknowledgement of Joint and Several Liability  




        Each Borrower acknowledges that it is jointly and severally liable for all of the Obligations under the Loan Documents. Each Borrower expressly understands,
agrees and acknowledges that (i) Borrowers are all Affiliated entities by common ownership, (ii) each Borrower desires to have the availability of one common credit facility instead of separate credit
facilities, (iii) each Borrower has requested that Lender extend such a common credit facility on the terms herein provided, (iv) Lender will be lending against, and relying on a lien upon, all of
Borrowers' assets even though the proceeds of any particular loan made hereunder may not be advanced directly to a particular Borrower, (v) each Borrower will
nonetheless benefit by the making of all such loans by Lender and the availability of a single credit facility of a size greater than each could independently warrant, and (vi) all of the
representations, warranties, covenants, obligations, conditions, agreements and other terms contained in the Loan Documents shall be applicable to and shall be binding upon each Borrower. 


IV.    CONDITIONS PRECEDENT  



 4.1    Conditions to Initial Overadvance on Restatement Date and Closing  




        The obligations of Lender to consummate the transactions contemplated herein and to make an Initial Overadvance on the Restatement Date are subject to the
satisfaction, in the sole judgment of Lender, of the following: 



        (a)   (i)    Borrower
shall have delivered to Lender (A) the Loan Documents (including the Equity Fee Participation Agreement) to which it is a party, each duly
executed by an authorized officer of Borrower and the other parties thereto, (B) a Borrowing Certificate for the Initial Overadvances and any concurrent Advance under the Revolving Facility executed
by an authorized officer of Borrower, and (ii) each Guarantor shall have delivered to Lender the Loan Documents to which such Guarantor is a party, each duly executed and delivered by such Guarantor
or an authorized officer of such Guarantor, as applicable, and the other parties thereto; 



        (b)   all
in form and substance satisfactory to Lender in its sole discretion, Lender shall have received (i) a report of Uniform Commercial Code financing statement, tax and
judgment lien searches performed with respect to each Borrower and Guarantor in each jurisdiction determined by Lender in its sole discretion, and such report shall show no Liens on the Collateral
(other than Permitted Liens), (ii) each document (including, without limitation, any Uniform Commercial Code financing statement) required by any Loan Document or under law or requested by Lender to
be filed, registered or recorded to create in favor of Lender, a perfected first priority security interest upon the Collateral, and (iii) evidence of each such filing, registration or recordation and
of the payment by Borrower of any necessary fee, tax or expense relating thereto; 



        (c)   Lender
shall have received (i) the Charter and Good Standing Documents, all in form and substance acceptable to Lender, (ii) a certificate of the corporate secretary or
assistant secretary of each Borrower and Guarantor dated the Restatement Date, as to the incumbency and signature of the Persons executing the Loan Documents, in form and substance acceptable to
Lender, and (iii) the written legal opinion of counsel for Borrower and Guarantors, in form and substance satisfactory to Lender and its counsel; 


        (d)   Lender
shall have received a certificate of the chief financial officer (or, in the absence of a chief financial officer, the chief executive officer) of each Borrower
and Guarantor, in form and substance satisfactory to Lender (each, a "Solvency Certificate"), certifying (i) the solvency of such Person after giving
effect to the transactions and the Indebtedness contemplated by the Loan 


6







 



Documents,
and (ii) as to such Person's financial resources and ability to meet its obligations and liabilities as they become due, to the effect that as of the Restatement Date and the Borrowing Date
for the Initial Overadvance and after giving effect to such transactions and Indebtedness: (A) the assets of such Person, at a Fair Valuation, exceed the total liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities but calculated at all times prior to the consummation of the Merger to exclude negative retained earnings as of the Restatement Date) of such
Person, and (B) no unreasonably small capital base with which to engage in its anticipated business exists with respect to such Person; 


        (e)   Lender
shall have completed examinations, the results of which shall be satisfactory in form and substance to Lender, of the Collateral, the financial statements and the
books, records, business, obligations, financial condition and operational state of each Borrower and Guarantor, and each such Person shall have demonstrated to Lender's satisfaction that (i) its
operations comply, in all respects deemed material by Lender, in its sole judgment, with all applicable federal, state, foreign and local laws, statutes and regulations, (ii) its operations are not
the subject of any governmental investigation, evaluation or any remedial action which could result in any expenditure or liability deemed material by Lender, in its sole judgment, and (iii) it has no
liability (whether contingent or otherwise) that is deemed material by Lender, in its sole judgment; 


        (f)    Lender
shall have received all fees, charges and expenses payable to Lender on or prior to the Restatement Date pursuant to the Loan Documents; 


        (g)   all
in form and substance satisfactory to Lender in its sole discretion, Lender shall have received such consents, approvals and agreements, including, without
limitation, any applicable Landlord Waivers and Consents and Warehouse Waivers and Consents with respect to any and all leases, warehouses and other locations set forth on  Schedule 5.4, from such
third parties as Lender and its counsel shall determine are necessary or desirable with respect to (i) the Loan Documents
and/or the transactions contemplated thereby, and/or (ii) claims against any Borrower or Guarantor or the Collateral; 


        (h)   Borrower
shall be in compliance with Section 6.5, and Lender shall have received original certificates of all
insurance policies of Borrower confirming that they are in effect and that the premiums due and owing with respect thereto have been paid in full and naming Lender as loss payee or additional insured,
as appropriate; 


        (i)    all
corporate and other proceedings, documents, instruments and other legal matters in connection with the transactions contemplated by the Loan Documents (including,
but not limited to, those relating to corporate and capital structures of Borrower) shall be satisfactory to Lender; 


        (j)    Lender
shall have received, in form and substance satisfactory to Lender, evidence of the release and termination of any and all Liens, security interest and/or Uniform
Commercial Code financing statements in, on, against or with respect to any of the Collateral (other than Permitted Liens); 


        (k)   If
not done on the Closing Date, Borrower shall have executed and filed IRS Form 8821 with the appropriate office of the Internal Revenue Service; 


        (l)    The
Employees shall have executed and delivered the Validity Certificate; and 


        (m)  Lender
shall have received such other documents, certificates, information or legal opinions as Lender may reasonably request, all in form and substance reasonably
satisfactory to Lender. 


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 4.2    Conditions to Each Advance and Overadvance  




        The obligations of Lender to make any Advance and Overadvance (including, without limitation, Initial Overadvances) are subject to the satisfaction, in the sole
judgment of Lender, of the following additional conditions precedent: 


        (a)   Borrower
shall have delivered to Lender a Borrowing Certificate for the Advance or the Overadvance executed by an authorized officer of Borrower, which shall constitute
a representation and warranty by Borrower as of the Borrowing Date of such Advance and Overadvance that the conditions contained in this  Section 4.2 have been satisfied; provided, however, that any determination as to whether to fund
Advances, Overadvances or extensions of credit shall be made by Lender in its sole discretion; 


        (b)   each
of the representations and warranties made by Borrower in or pursuant to this Agreement shall be accurate, before and after giving effect to such Advance or
Overadvance, and no Default or Event of Default shall have occurred or be continuing or would exist after giving effect to the Advance or Overadvance on such date; 


        (c)   immediately
after giving effect to (i) the requested Advance, the aggregate outstanding principal amount of Advances under the Revolving Facility shall not exceed either
the Availability or the Facility Cap and (ii) the requested Overadvance, the aggregate outstanding principal amount of Overadvances shall not exceed the Overadvance Facility Cap; 



        (d)   except
as disclosed in the historical financial statements, there shall be no liabilities or obligations with respect to Borrower of any nature whatsoever which, either
individually or in the aggregate, would reasonably be likely to have a Material Adverse Effect; and 


        (e)   Lender
shall have received all fees, charges and expenses payable to Lender on or prior to such date pursuant to the Loan Documents. 



V.    REPRESENTATIONS AND WARRANTIES  


        Borrower, jointly and severally, represents and warrants as of the date hereof, the Restatement Date, and each Borrowing Date as follows: 



 5.1    Organization and Authority  




        Each Borrower is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its state of formation.
Borrower (i) has all requisite corporate or limited liability company power and authority to own its properties and assets and to carry on its business as now being conducted and as
contemplated in the Loan Documents, (ii) is duly qualified to do business in every jurisdiction in which failure so to qualify would reasonably be expected to have a Material
Adverse Effect, and (iii) has all requisite corporate or limited liability company power and authority (A) to execute, deliver and perform the Loan Documents to which it is a party,
(B) to borrow hereunder, (C) to consummate the transactions contemplated under the Loan Documents, and (D) to grant the Liens with regard to the Collateral pursuant to the
Security Documents to which it is a party. No Borrower is an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or is controlled by such
an "investment company." 



 5.2    Loan Documents  




        The execution, delivery and performance by Borrower of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby,
(i) have been duly authorized by all requisite action of each such Person and have been duly executed and delivered by or on behalf of each such Person; (ii) do not violate any
provisions of (A) applicable law, statute, rule, regulation, ordinance or tariff, (B) any order of any Governmental Authority binding on any such Person or any of their respective
properties, or (C) the certificate of incorporation or bylaws (or any other equivalent 


8







 

governing
agreement or document) of any such Person, or any agreement between any such Person and its respective stockholders, members, partners or equity owners or among any such stockholders,
members, partners or equity owners; (iii) are not in conflict with, and do not result in a breach or default of or constitute an event of default, or an event, fact, condition or circumstance
which, with notice or passage of time, or both, would constitute or result in a conflict, breach, default or event of default under, any indenture, agreement or other instrument to which any such
Person is a party, or by which the properties or assets of such Person are bound; (iv) except as set forth therein or Permitted Liens, will not result in the creation or imposition of any Lien
of any nature upon any of the properties or assets of any such Person, and (v) except as set forth on Schedule 5.2, do not require the
consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person. When executed and delivered, each of the Loan Documents to which
Borrower is a party will constitute the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity which may limit the
availability of equitable remedies (whether in a proceeding at law or in equity). 



 5.3    Subsidiaries, Capitalization and Ownership Interests  




        Except as listed on Schedule 5.3, Borrower has no Subsidiaries. NationsHealth Supply, L.L.C. is presently inactive
but has not been dissolved. Schedule 5.3 states the authorized and issued capitalization of Borrower, the number and class of equity securities
and/or ownership, voting or partnership interests
issued and outstanding of Borrower and the record and beneficial owners thereof (including options, warrants and other rights to acquire any of the foregoing). The ownership or partnership interests
of each Borrower that is a limited partnership or a limited liability company are not certificated, the documents relating to such interests do not expressly state that the interests are governed by
Article 8 of the Uniform Commercial Code, and the interests are not held in a securities account. The outstanding equity securities and/or ownership, voting or partnership interests of Borrower have
been duly authorized and validly issued and are fully paid and nonassessable, and each Person listed on Schedule 5.3 owns beneficially and of
record all the equity securities and/or ownership, voting or partnership interests it is listed as owning free and clear of any Liens other than Liens created by the Security Documents.  Schedule 5.3 also lists the directors, members, managers and/or partners of Borrower. Except as listed on  Schedule 5.3, Borrower does not own an interest in, participate in or engage in any joint
venture, partnership or similar arrangements with any
Person. 



 5.4    Properties  




        Borrower (i) is the sole owner and has good, valid and marketable title to, or a valid leasehold interest in, all of its properties and assets, including the
Collateral, whether personal or real, subject to no transfer restrictions or Liens of any kind except for Permitted Liens, and (ii) is in compliance in all material respects with each lease to
which it is a party or otherwise bound. Schedule 5.4 lists all real properties (and their locations) owned or leased by or to, and all other
assets or property that are leased or licensed by, Borrower and all leases (including leases of leased real property) covering or with respect to such properties and assets and all warehouses,
fulfillment houses or other locations at which any of Borrower's Inventory is located. Borrower enjoys peaceful and undisturbed possession under all such leases and such leases are all the leases
necessary for the operation of such properties and assets, are valid and subsisting and are in full force and effect. All warehouse, fulfillment and other agreements relating to Borrower's Inventory
are in full force and effect. 


9









  



 5.5    Other Agreements  




        With the exception of: the Agreement and Plan of Merger dated as of March 9, 2004 and amended as of June 2, 2004 (the "Merger
Agreement"), among RGGPLS HOLDING, INC. ("RGGPLS"), GRH HOLDINGS, L.L.C.
("GRH"), BECTON, DICKINSON AND COMPANY (collectively, with RGGPLS and GRH, the "Selling
Shareholder(s)"), MILLSTREAM ACQUISITION CORPORATION ("MAC"), N Merger L.L.C. (collectively, with MAC,  "Millstream"), and
NationsHealth Holdings, L.L.C. and the related agreements between the Selling Shareholders, Millstream and NationsHealth Holdings,
L.L.C. executed in furtherance of the Merger Agreement (collectively, with the Merger Agreement, the "Merger Documents"), true and accurate copies of
which are attached hereto as Schedule 5.5, Borrower is not (i) a party to any judgment, order or decree or any agreement, document or instrument, or
subject to any restriction, which would affect its ability to execute and deliver, or perform under, any Loan Document or to pay the Obligations, (ii) in default in the performance, observance or
fulfillment of any obligation, covenant or condition contained in any agreement, document or instrument to which it is a party or to which any of its properties or assets are subject, which default,
if not remedied within any applicable grace or cure period would reasonably be expected to have a Material Adverse Effect, nor is there any event, fact, condition or circumstance which, with notice or
passage of time or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing which, if not remedied within any applicable grace or cure period
would reasonably be expected to have a Material Adverse Effect; or (iii) a party or subject to any agreement, document or instrument with respect to, or obligation to pay any, Management or Service
Fee with respect to, the ownership, operation, leasing or performance of any of its business or any facility, nor is there any manager with respect to any such facility. 



 5.6    Litigation  




        There is no action, suit, proceeding or investigation pending or, to their knowledge, threatened against Borrower that (i) questions or could prevent the validity
of any of the Loan Documents or the right of Borrower to enter into any Loan Document or to consummate the transactions contemplated thereby, (ii) would reasonably be expected to be or have, either
individually or in the aggregate, any Material Adverse Change or Material Adverse Effect, or (iii) would reasonably be expected to result in any Change of Control or other change in the current
ownership, control or management of Borrower. Borrower is not aware that there is any basis for the foregoing. Borrower is not a party or subject to any order, writ, injunction, judgment or decree of
any Governmental Authority. There is no action, suit, proceeding or investigation initiated by Borrower currently pending. Borrower has no existing accrued and/or unpaid Indebtedness to any
Governmental Authority or any other governmental payor. 



 5.7    Hazardous Materials  




        Borrower is in compliance with all applicable Environmental Laws. Borrower has not been notified of any action, suit, proceeding or investigation (i) relating in
any way to compliance by or liability of Borrower under any Environmental Laws, (ii) which otherwise deals with any Hazardous Substance or any Environmental Law, or (iii) which seeks to suspend,
revoke or terminate any license, permit or approval necessary for the generation, handling, storage, treatment or disposal of any Hazardous Substance, except where such non-compliance would not
reasonably be expected to have a Material Adverse Effect. 



 5.8    Potential Tax Liability; Tax Returns; Governmental Reports  




        (a)    Except as disclosed in Schedule 5.8, Borrower (i) has not received any oral or written
communication from the Internal Revenue Service with respect to any investigation or assessment relating to the Borrower directly, or relating to any consolidated tax return which was filed on behalf
of 


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Borrower,
(ii) is not aware of any year which remains open pending tax examination or audit by the IRS, and (iii) is not aware of any information that could give rise to an IRS tax liability or
assessment. 


        (b)    Borrower
(i) has filed all federal, state, foreign (if applicable) and local tax returns and other reports which are required by law to be filed by Borrower, and (ii)
has paid all taxes, assessments, fees and other governmental charges, including, without limitation, payroll and other employment related taxes, in each case that are due and payable, except only for
items that Borrower is currently contesting in good faith with adequate reserves under GAAP, which contested items are described on Schedule 5.8.



 5.9    Financial Statements and Reports  




        All financial statements and financial information relating to Borrower that have been or may hereafter be delivered to Lender by Borrower are accurate and
complete in all material respects and have been prepared in accordance with GAAP consistently applied with prior periods. Borrower has no material
obligations or liabilities of any kind not disclosed in such financial information or statements, and since the date of the most recent financial statements submitted to Lender, there has not occurred
any Material Adverse Change, Material Adverse Effect or Liability Event or, to Borrower's knowledge, any other event or condition that would reasonably be expected to have a Material Adverse Effect or
cause or constitute a Liability Event. 



 5.10    Compliance with Law  




        Borrower (i) is in compliance with all laws, statutes, rules, regulations, ordinances and tariffs of any Governmental Authority applicable to Borrower and/or
Borrower's business, assets or operations, including, without limitation, applicable requirements of the Standards for Privacy of Individually Identifiable Health Information which were promulgated
pursuant to the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), ERISA and Healthcare Laws, and (ii) is not in violation of any
order of any Governmental Authority or other board or tribunal, except in the case of (i) and (ii) above where noncompliance or violation could not reasonably be expected to have a Material Adverse
Effect. There is no event, fact, condition or circumstance which, with notice or passage of time, or both, would constitute or result in any noncompliance with, or any violation of, any of the
foregoing, in each case except where noncompliance or violation could not reasonably be expected to have a Material Adverse Effect. Borrower has not received any notice that Borrower is not in
compliance in any respect with any of the requirements of any of the foregoing. Borrower has (a) not engaged in any Prohibited Transactions as defined in Section 406 of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, (b) not failed to meet any applicable minimum funding requirements under Section 302 of ERISA in
respect of its plans and no funding requirements have been postponed or delayed, (c) no knowledge of any amounts due but unpaid to the Pension Benefit Guaranty Corporation, or of any event or
occurrence which would cause the Pension Benefit Guaranty Corporation to institute proceedings under Title IV of ERISA to terminate any of the employee benefit plans, (d) no fiduciary responsibility
under ERISA for investments with respect to any plan existing for the benefit of Persons other than its employees or former employees, or (e) not withdrawn, completely or partially, from any
multi-employer pension plans so as to incur liability under the MultiEmployer Pension Plan Amendments of 1980. With respect to Borrower, there exists no event described in Section 4043 of ERISA,
excluding Subsections 4043(b)(2) and 4043(b)(3) thereof, for which the thirty (30) day notice period contained in 12 C.F.R. ! 2615.3 has not been waived. Borrower has maintained in all material
respects all records required to be maintained by the Joint Commission on Accreditation of Healthcare Organizations, the Food and Drug Administration, Drug Enforcement Agency and State Boards of
Pharmacy and the federal and state Medicare and Medicaid programs as required by the Healthcare Laws and, to the best knowledge of Borrower, there are no presently existing circumstances which would
reasonably be expected to result in material violations of the Healthcare Laws. There is no Liability Event. 


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 5.11    Intellectual Property  




        Except as set forth on Schedule 5.11, Borrower does not own, license or utilize, and is not a party to, any
material patents, patent applications, trademarks, trademark applications, service marks, registered copyrights, copyright applications, copyrights, trade names, trade secrets, software or licenses
(collectively, the "Intellectual Property"). 



 5.12    Licenses and Permits; Labor  




        Borrower is in compliance with and has all Permits and Intellectual Property necessary or required by applicable law or Governmental Authority for the operation
of its businesses except any of the foregoing which would not reasonably be expected to have a Material Adverse Effect. All of the foregoing are in full force and effect and not in known conflict with
the rights of others. Borrower is not (i) in breach of or default under the provisions of any of the foregoing, nor is there any event, fact, condition or circumstance which, with notice or passage of
time or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing which, if not remedied within any applicable grace or cure period would
reasonably be expected to have a Material Adverse Effect, (ii) a party to or subject to any agreement, instrument or restriction that is so unusual or burdensome that it might have a Material Adverse
Effect, and/or (iii) and has not been, involved in any labor dispute, strike, walkout or union organization which would reasonably be expected to have a Material Adverse Effect. 



 5.13    No Default  




        There does not exist any Default or Event of Default or any event, fact, condition or circumstance which, with the giving of notice or passage of time or both,
would constitute or result in a Default or Event of Default. 



 5.14    Disclosure  




        No Loan Document nor any other agreement, document, certificate, or statement furnished to Lender by or on behalf of Borrower in connection with the transactions
contemplated by the Loan Documents,
nor any representation or warranty made by Borrower in any Loan Document, contains any untrue statement of material fact or omits to state any fact necessary to make the statements therein not
materially misleading. There is no fact known to Borrower which has not been disclosed to Lender in writing which would reasonably be expected to have a Material Adverse Effect. 



 5.15    Existing Indebtedness; Investments, Guarantees and Certain Contracts  




        Except as contemplated by the Loan Documents or as otherwise set forth on Schedule 5.15A, Borrower (i) has no
outstanding Indebtedness, (ii) is not subject or party to any mortgage, note, indenture, indemnity or guarantee of, with respect to or evidencing any Indebtedness of any other Person, or (iii) does
not own or hold any equity or long-term debt investments in, and does not have any outstanding advances to or any outstanding guarantees for the obligations of, or any outstanding borrowings from, any
Person. Borrower has performed all material obligations required to be performed by Borrower pursuant to or in connection with any items listed on Schedule
5.15A and there has occurred no breach, default or event of default under any document evidencing any such items or any fact, circumstance, condition or event which, with the
giving of notice or passage of time or both, would constitute or result in a breach, default or event of default thereunder. Schedule 1.15B sets forth
all Indebtedness with a maturity date during the Term, and identifies such maturity date. 


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 5.16    Other Agreements  




        Except as set forth on Schedule 5.5, Schedule 5.16 and  Schedule
5.23, (i) there are no existing or proposed agreements, arrangements, understandings or transactions between Borrower and any of Borrower's
officers, members, managers, directors, stockholders, partners, other interest holders, employees or Affiliates or any members of their respective immediate families, and (ii) none of the foregoing
Persons are directly or indirectly, indebted to or have any direct or indirect ownership, partnership or voting interest in, to Borrower's knowledge, any Affiliate of Borrower or any Person that
competes with Borrower (except that any such Persons may own stock in (but not exceeding two (2%) percent of the outstanding capital stock of) any publicly traded company that may compete with
Borrower. 



 5.17    Insurance  




        Borrower has in full force and effect such insurance policies as are customary in its industry and as may be required pursuant to Section
6.5 hereof. All such insurance policies are listed and described on Schedule 5.17. 



 5.18    Names; Location of Offices, Records and Collateral  




        During the preceding five years, Borrower has not conducted business under or used any name (whether corporate, partnership or assumed) other than as shown on  Schedule 5.18A. Borrower is the sole owner of all of its names listed on Schedule 5.18A, and any and all
business done and invoices issued in such names are Borrower's sales, business and invoices. Each trade name of Borrower represents a division or trading style of Borrower. Borrower maintains its
places of business and chief executive offices only at the locations set forth on Schedule 5.18B, and all Accounts of Borrower arise, originate and are
located, and all of the Collateral, including Inventory, and all books and records in connection therewith or in any way relating thereto or evidencing the Collateral are located and shall only be
located, in and at such locations. All of the Collateral is located only in the continental United States. 



 5.19    Non-Subordination  




        The Obligations are not subordinated in any way to any other obligations of Borrower or to the rights of any other Person. 



 5.20    Accounts and Inventory  




        (a)    In determining which Accounts are Eligible Receivables, Lender may rely on all statements and representations made by Borrower with respect to
any Account. Unless otherwise indicated in writing to Lender (including, without limitation, any Borrowing Certificate), (i) each Account of Borrower is genuine and in all respects what it purports to
be and is not evidenced by a judgment, (ii) each Account of Borrower arises out of a completed, bona fide sale and delivery of goods or rendering of Services by Borrower in the ordinary course of
business and in accordance with the terms and conditions of all purchase orders, contracts, certifications, participations, certificates of need and other documents relating thereto or forming a part
of the contract between Borrower and the Account Debtor, (iii) each Account of Borrower is for a liquidated amount maturing as stated in a claim or invoice covering such sale of goods or rendering of
Services, a copy of which has been furnished or is available to Lender, (iv) each Account of Borrower together with Lender's security interest therein, is not and will not be in the future (by
voluntary act or omission by Borrower), subject to any offset, lien, deduction, defense, dispute, counterclaim or other adverse condition, is absolutely owing to Borrower and is not contingent in any
respect or for any reason (except Accounts owed or owing by Medicaid/Medicare Account Debtors that may be subject to offset or deduction under applicable law), (v) there 


20







 

are
no facts, events or occurrences which in any way impair the validity or enforceability of any Account of Borrower or tend to reduce the amount payable thereunder from the face amount of the claim
or invoice and statements delivered to Lender with respect thereto, (vi) (A) to the knowledge of Borrower, the Account Debtor under each Account of Borrower had the capacity to contract at the time
any contract or other document giving rise thereto was executed and (B) to the knowledge of Borrower, each such Account Debtor is solvent, (vii) to the knowledge of Borrower, there are no proceedings
or actions which are threatened or pending against any Account Debtor under any Account of Borrower which might result in any Material Adverse Change in such Account Debtor's financial condition or
the collectability thereof, (viii) each Account of Borrower has been billed and forwarded to the Account Debtor for payment in accordance with applicable laws and is in compliance and conformance with
any requisite procedures, requirements and regulations governing payment by such Account Debtor with respect to such Account, and, if due from a Medicaid/Medicare Account Debtor, is properly payable
directly to Borrower, (ix) Borrower has obtained and currently has all material Permits necessary in the generation of each Account of Borrower, and (x) Borrower has disclosed to Lender on each
Borrowing Certificate the amount of all Accounts of Borrower for which Medicare is the Account Debtor and for which payment has been denied and subsequently appealed pursuant to the procedure
described in the definition of Eligible Receivables hereof. Borrower is pursuing all available appeals in respect of such Accounts which Borrower usually and customarily appeals in the ordinary course
of its business. 


        (b)    In
determining which Inventory is Eligible Inventory, Lender may rely on all statements and representations made by Borrower with respect to any Inventory. Unless
otherwise indicated in writing to Lender (including, without limitation, any Borrowing Certificate), (i) Borrower has at all times maintained correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory in all material respects, Borrower's cost therefore and daily withdrawals therefrom and
additions thereto; (b) has not removed any Inventory from the locations set forth or permitted herein, except for sales of Inventory in the ordinary course of Borrower's business and except to move
Inventory directly from one location set forth or permitted herein to another such location; (c) has produced, used, stored, shipped and maintained Inventory with all reasonable care and caution and
in accordance with applicable standards of any insurance and in conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (d) except as set forth on Schedule 5.20, has not sold Inventory to any customer on approval, or any other
basis which entitles the customer to return or may obligate Borrower to repurchase such Inventory; (e) has kept Inventory in good and marketable condition; and (f) has not acquired or accepted any
Inventory on consignment or approval except as set forth on Schedule 5.20 and (g) has not permitted Inventory to be subject to any Lien except Liens in
favor of Lender. 



 5.21    Healthcare  




        Without limiting or being limited by any other provision of any Loan Document, Borrower has timely filed or caused to be filed all cost and other reports of every
kind required under any Healthcare Laws or any provider or other agreement relating to Borrower's participation in Medicare or Medicaid programs. Subject to subsection (ix) of  Section 5.20, there are no
claims, actions or appeals pending (and Borrower has not filed any claims or reports which could reasonably result in any
such claims, actions or appeals) before any commission, board or agency or other Governmental Authority, including, without limitation, any intermediary or carrier, the Provider Reimbursement Review
Board or the Administrator of the Centers for Medicare and Medicaid Services, with respect to any state or federal Medicare or Medicaid cost reports or claims filed by Borrower, or any disallowance by
any commission, board or agency or other Governmental Authority in connection with any audit of such cost reports. No validation review or program integrity review related to Borrower or the
consummation of the transactions contemplated herein or to the Collateral have been conducted by any 


21







 

commission,
board or agency or other Governmental Authority in connection with the Medicare or Medicaid programs, and to the knowledge of Borrower, no such reviews are scheduled, pending or threatened
against or affecting any of the providers, any of the Collateral or the consummation of the transactions contemplated hereby. 



 5.22    Survival  




        Borrower makes the representations and warranties contained herein with the knowledge and intention that Lender is relying and will rely thereon. All such
representations and warranties will survive the
execution and delivery of this Agreement and the making of the Advances under the Revolving Facility and Overadvances under the Overadvance Facility. 



 5.23    Merger Documents, HealthTrans Agreement, Wellpoint Agreement and Employment Agreements  




        (a)    No Borrower or Selling Shareholder is in default in the performance, observance or fulfillment of any obligation, covenant or condition contained
in the Merger Documents nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of
default under any of the foregoing which, if not remedied within any applicable grace or cure period could reasonably be expected to have a Material Adverse Effect on the Merger Documents. There does
not exist any default or event of default or any event, fact, condition or circumstance, which, with the giving of notice or passage of time or both, would constitute or result in a default or event
of default on the part of any Borrower, Selling Shareholder or Millstream in connection with any of the Merger Documents. No amendment or modification has been made to any of the Merger Documents
which has not been provided to Lender. No Borrower is aware of any event, fact, condition or circumstance (other than conditions set forth in the Merger Documents as of the Closing Date) which, with
the giving of notice or passage of time or both, which may result in the termination of the Merger Documents, prevent the closing of the Merger or delay the closing of the Merger beyond July 31, 2004. 


        (b)    Except
as set forth on Schedule 5.23, no Borrower is in default in the performance, observance or fulfillment of any
obligation, covenant or condition contained in the HealthTrans Agreement, nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or
result in a conflict, breach, default or event of default under any of the foregoing which, if not remedied within any applicable grace or cure period could reasonably be expected to have a Material
Adverse Effect on the HealthTrans Agreement. There does not exist any default or event of default or any event, fact, condition or circumstance, which, with the giving of notice or passage of time or
both, would constitute or result in a default or event of default on the part of any Borrower in connection with the HealthTrans Agreement. No amendment or modification has been made to the
HealthTrans Agreement which has not been provided to Lender. 


        (c)    No
Borrower is in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in the Wellpoint Agreement, nor is there any
event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under any of the foregoing which, if
not remedied within any applicable grace or cure period could reasonably be expected to have a Material Adverse Effect on the Wellpoint Agreement. There does not exist any default or event of default
or any event, fact, condition or circumstance, which, with the giving of notice or passage of time or both, would constitute or result in a default or event of default on the part of any Borrower in
connection with the Wellpoint Agreement. No amendment or modification has been made to the Wellpoint Agreement which has not been provided to Lender. 


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        (d)    No
Borrower is in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any Employment Agreement, nor is there any
event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under any of the foregoing which, if
not remedied within any applicable grace or cure period could reasonably be expected to have a Material Adverse Effect on any Employment Agreement. No amendment or modification has been made to any
Employment Agreement which has not been provided to Lender. No Employment Agreement has been terminated or, to Borrower's knowledge, threatened with termination. 


VI.    AFFIRMATIVE COVENANTS  


        Each Borrower, jointly and severally, covenants and agrees that, until full performance and satisfaction, and indefeasible payment in full in cash, of all the
Obligations and termination of this Agreement: 



 6.1    Financial Statements, Borrowing Certificate, Financial Reports and Other Information  




        (a)    Financial Reports.    In addition to providing the Borrowing Certificate in accordance with  Section 2.4, Borrower shall furnish to Lender (i) as
soon as available and in any event within ninety (90) calendar days after the end of each fiscal
year of Borrower (or such earlier date required by the laws, regulations and rules of the Securities and Exchange Commission), audited annual consolidated and consolidating financial statements of
Borrower, including the notes thereto, consisting of a consolidated and consolidating balance sheet at the end of such completed fiscal year and the related consolidated
and consolidating statements of income, retained earnings, cash flows and owners' equity for such completed fiscal year, which financial statements shall be prepared and certified without
qualification by an independent certified public accounting firm satisfactory to Lender and accompanied by related management letters, if available, and (ii) as soon as available and in any event
within thirty (30) calendar days after the end of each calendar month (forty five (45) days after the end of March 2004), unaudited consolidated and consolidating financial statements of Borrower
consisting of a balance sheet and statements of income, retained earnings, cash flows and owners' equity as of the end of the immediately preceding calendar month. All such financial statements shall
be prepared in accordance with GAAP consistently applied with prior periods. With each such financial statement, Borrower shall also deliver a certificate of its chief financial officer stating that
(A) such person has reviewed the relevant terms of the Loan Documents and the condition of Borrower, (B) no Default or Event of Default has occurred or is continuing, or, if any of the foregoing has
occurred or is continuing, specifying the nature and status and period of existence thereof and the steps taken or proposed to be taken with respect thereto, and (C) Borrower is in compliance with all
financial covenants attached as Annex I hereto. Such certificate shall be accompanied by the calculations necessary to show compliance with the financial covenants in a form satisfactory to Lender and
shall also set forth any payments made in respect of Permitted Subordinated Debt as permitted under any Subordination Agreement applicable thereto. 


        (b)    Other Materials.    Borrower shall furnish to Lender as soon as available, and in any event within ten (10)
calendar days after the preparation or issuance thereof or at such other time as set forth below: (i) copies of such financial statements (other than those required to be delivered pursuant to  Section 6.1(a)) prepared by, for or on behalf of Borrower and any other notes, reports and other materials related thereto, including, without
limitation, any pro forma financial statements, (ii) any reports, returns, information, notices and other materials that Borrower shall send to its stockholders, members, partners or other equity
owners at any time, (iii) all Medicare and Medicaid cost reports and other documents and materials filed by Borrower and any other reports, materials or other information regarding or otherwise
relating to Medicaid or Medicare prepared by, for or on behalf of Borrower, including, without limitation, (A) copies of licenses and permits required by any applicable federal, 


23







 



state,
foreign or local law, statute ordinance or regulation or Governmental Authority for the operation of its business, (B) Medicare and Medicaid provider numbers and agreements, (C) state surveys
pertaining to any healthcare facility operated, owned or leased by Borrower or any of its Affiliates or Subsidiaries, and (D) participating agreements relating to medical plans, (iv) (A) within
fifteen (15) calendar days (thirty (30) calendar days in the case of the first four (4) months following the Closing Date) (after the end of each calendar month for such month, a summary report of the
status of all payments, denials and appeals of all Medicare and/or Medicaid Accounts and accounts receivable and account payable aging schedule and (B), within thirty (30) calendar days after the end
of each calendar month for such month, a sales and collection report, including a report of sales, credits issued and collections received, all such reports showing a reconciliation to the amounts
reported in the monthly financial statements, (v) promptly upon receipt thereof, copies of any reports submitted to Borrower by its independent accountants in connection with any interim audit of the
books of such Person or any of its Affiliates and copies of each management control letter provided by such independent accountants, (vi) within fifteen (15) calendar days after the execution thereof,
a copy of any contracts with the federal government or with a Governmental Authority in the State of New York, Vermont or Washington, and (vii) such additional information, documents, statements,
reports and other materials as Lender may reasonably request from a credit or security perspective or otherwise from time to time. 


        (c)    Notices.    Borrower shall promptly, and in any event within three (3) calendar days after Borrower or any
authorized officer of Borrower obtains knowledge thereof, notify Lender in writing of (i) any pending or threatened litigation, suit, investigation, arbitration, dispute resolution proceeding or
administrative proceeding brought or initiated by or against Borrower or otherwise affecting or involving or relating to Borrower or any of its property or assets to the extent (A) the amount in
controversy exceeds $30,000, or (B) to the extent any of the foregoing seeks injunctive or declarative relief, (ii) any Default or Event of Default, which notice shall specify the nature and status
thereof, the period of existence thereof and what action is proposed to be taken with respect thereto, (iii) any other development, event, fact, circumstance or condition that would reasonably be
likely to have a Material Adverse Effect, in each case describing the nature and status thereof and the action proposed to be taken with respect thereto, (iv) any notice received by Borrower from any
payor of a claim, suit or other action such payor has, claims or has filed against Borrower in an amount exceeding $30,000, (v) any matter(s) affecting the value, enforceability or collectability of
any of the Collateral, including, without limitation, claims or disputes in the amount of $30,000 or more, singly or in the aggregate, in existence at any one time, (vi) any notice given by Borrower
to any other lender of Borrower, which notice to Lender shall be accompanied by a copy of the applicable notice given to the other Lender, (vii) receipt of any notice or request from any Governmental
Authority or governmental payor regarding any liability or claim of liability (other than notices received from any Governmental Authority in connection the usual and customary processing of claims by
Borrower in the ordinary course of business), (viii) any notice given by or received by Borrower regarding any default, noncompliance, proposed termination, waiver or consent under the Merger
Documents, Employment Agreements, HealthTrans Agreement (including any reduction in the number of transactions processed thereunder during any month to 50,000 or less) or Wellpoint Agreement and/or
(ix) any Account becoming evidenced or secured by an Instrument or Chattel Paper. 



        (d)    Consents.    Borrower shall obtain and deliver from time to time all required consents, approvals and
agreements from such third parties as Lender shall determine are necessary or desirable in its sole discretion, each of which must be satisfactory to Lender in its sole discretion, with respect to (i)
the Loan Documents and the transactions contemplated thereby, (ii) claims against Borrower or the Collateral, and/or (iii) any agreements, consents, documents or instruments to which Borrower is a
party or by which any properties or assets of Borrower or any of the Collateral is or are bound or subject, including, without limitation, Landlord Waivers and Consents with respect to leases and
Warehouse Waivers and Consents with respect to warehouse, fulfillment and similar agreements. 


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        (e)    Operating Budget.    Borrower shall furnish to Lender on or prior to the Closing Date and for each fiscal year
of Borrower thereafter not later than the earlier of (i) thirty (30) calendar days after the end of each fiscal year or (ii) thirty (30) calendar days after the same is available, consolidated and
consolidating month by month projected operating budgets, annual projections, profit and loss statements, balance sheets and cash flow reports of and for Borrower for such upcoming fiscal year
(including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), in each case prepared in accordance with GAAP consistently applied with prior
periods. 


        (f)    Non-Compliance Fee.    To the extent any of the foregoing items in this Section
6.1 are not delivered to Lender on a timely basis, Borrower shall be obligated to Lender for a daily fee equal to the greater of (i) $500, or (ii) five one-hundredths of one
percent (0.05%) of the then current outstanding principal balance of the Obligations, for each day until such item is delivered to Lender, whether or not a Default or Event of Default occurs or is
declared, provided that nothing shall prevent Lender from considering any failure to comply with the terms of this Section 6.1 to be a Default or an
Event of Default. 



 6.2    Payment of Obligations  




        Borrower shall make full and timely indefeasible payment in cash of the principal of and interest on the Loans, Advances, Overadvances and all other Obligations. 


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 6.3    Conduct of Business and Maintenance of Existence and Assets  




        Borrower shall (i) conduct its business in accordance with good business practices customary to the industry, (ii) engage principally in the same or similar lines
of business substantially as heretofore conducted, (iii) collect its Accounts in the ordinary course of business, (iv) maintain all of its material properties, assets and equipment used or useful in
its business in good repair, working order and condition (normal wear and tear excepted and except as may be disposed of in the ordinary course of business and in accordance with the terms of the Loan
Documents and otherwise as determined by Borrower using commercially reasonable business judgment), (v) from time to time to make all necessary or desirable repairs, renewals and replacements thereof,
as determined by Borrower using commercially reasonable business judgment, (vi) maintain and keep in full force and effect its existence and all material Permits and qualifications to do business and
good standing in each jurisdiction in which the ownership or lease of property or the nature of its business makes such Permits or qualification necessary and in which failure to maintain such Permits
or qualification could reasonably be expected to have a Material Adverse Effect; and (vii) remain in good standing and maintain operations in all jurisdictions in which currently located, except where
the failure to maintain such good standing could not reasonably be expected to have a Material Adverse Effect. 



 6.4    Compliance with Legal and Other Obligations  




        Borrower shall (i) comply in all material respects with all laws, statutes, rules, regulations, ordinances and tariffs of all Governmental Authorities applicable
to it or its business, assets or operations, including applicable requirements of the Standards for Privacy of Individually Identifiable Health Information which were promulgated pursuant to HIPAA;
(ii) pay all taxes, assessments, fees, governmental charges, claims for labor, supplies, rent and all other obligations or liabilities of any kind, except liabilities being contested in good faith and
against which adequate reserves have been established in accordance with GAAP, (iii) perform in accordance with its terms each contract, agreement or other arrangement to which it is a party or by
which it or any of the Collateral is bound, except where the failure to comply, pay or perform would not reasonably be expected to have a Material Adverse Effect, (iv) maintain and comply with all
material Permits necessary to conduct its business and comply with any new or additional requirements that may be imposed on it or its business, and (v) properly file all Medicaid/Medicare cost
reports. 



 6.5    Insurance  




        Borrower shall (i) keep all of its insurable properties and assets (including without limitation Inventory that is in transit (whether by vessel, air or land)
adequately insured in all material respects against losses, damages and hazards as are customarily insured against by businesses engaging in similar activities or owning similar assets or properties
and at least the minimum amount required by applicable law (and with respect to Inventory that is in transit, maintain insurance covering the same for its full replacement cost under all risk marine
insurance policies endorsed to cover all risks required by Lender and with such amounts of coverage and deductibles as Lender determines, in its Permitted Discretion (but taking into account insurance
practices of businesses engaging in substantially the same activities as Borrower), issued by such insurance carriers as are acceptable to Lender), including, without limitation, medical malpractice
and professional liability insurance, as applicable; and maintain general public liability insurance at all times against liability on account of damage to persons and property having such limits,
deductibles, exclusions and co-insurance and other provisions as are customary for a business engaged in activities similar to those of Borrower; and (ii) maintain insurance under all applicable
workers' compensation laws; all of the foregoing insurance policies to (A) be reasonably satisfactory in form and substance to Lender, (B) name Lender as loss payee and additional insured thereunder,
and (C) expressly provide that they cannot be altered, amended, modified or canceled without thirty (30) days prior written notice to Lender and that they inure to the benefit of 


2







 

Lender
notwithstanding any action or omission or negligence of or by Borrower or any insured thereunder. 



 6.6    True Books  




        Borrower shall (i) keep true, complete and accurate books of record and account in accordance with commercially reasonable business practices in which true and
correct entries are made of all of its and their dealings and transactions in all material respects; and (ii) set up and maintain on its books such reserves as may be required by GAAP with respect to
doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business, and include such reserves in its quarterly as well as year end financial statements. 



 6.7    Inspection; Periodic Audits  




        Borrower shall permit the representatives of Lender, at the expense of Borrower, from time to time during normal business hours upon reasonable notice, to (i)
visit and inspect any of its offices or properties or any other place where Collateral is located to inspect the Collateral and/or to examine or audit all of its books of account, records, reports and
other papers (but not more often than four (4) times per year so long as no Default or Event of Default exists), (ii) make copies and extracts therefrom, and (iii) discuss its business, operations,
prospects, properties, assets, liabilities, condition and/or Accounts and Inventory with its officers and independent public accountants (and by this provision such officers and accountants are
authorized to discuss the foregoing). 



 6.8    Further Assurances; Post Closing  




        At Borrower's cost and expense, Borrower shall (i) take such further actions, obtain such consents and approvals and duly execute and deliver such further
agreements, assignments, instructions or documents as Lender may request with respect to the purposes, terms and conditions of the Loan Documents and the consummation of the transactions contemplated
thereby, and (ii) without limiting and notwithstanding any other provision of any Loan Document, execute and deliver, or cause to be executed and delivered, such agreements and documents, and take or
cause to be taken such actions, and otherwise perform, observe and comply with such obligations, as are set forth on Schedule 6.8.



 6.9    Payment of Indebtedness  




        Except as otherwise prescribed in the Loan Documents, Borrower shall pay, discharge or otherwise satisfy at or before maturity (subject to applicable grace
periods and, in the case of trade payables, to ordinary course payment practices) all of its material obligations and liabilities, except when the amount or validity thereof is being contested in good
faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by Borrower in accordance with GAAP to the satisfaction of Lender in
its sole discretion. 



 6.10    Lien Searches  




        If Liens other than Permitted Liens exist, Borrower immediately shall take, execute and deliver all actions, documents and instruments necessary to release and
terminate such Liens. 



 6.11    Use of Proceeds  




        Borrower shall use the proceeds from the Revolving Facility and the Overadvance Facility only for the purposes set forth in the first "WHEREAS" clause of this
Agreement. 


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 6.12    Collateral Documents; Security Interest in Collateral  




        Borrower shall (i) execute, obtain, deliver, file, register and/or record any and all financing statements, continuation statements, stock powers, instruments and
other documents, or cause the execution, filing, registration, recording or delivery of any and all of the foregoing, that are necessary or required under law or otherwise or reasonably requested by
Lender to be executed, filed, registered, obtained, delivered or recorded to create, maintain, perfect, preserve, validate or otherwise protect the pledge of the Collateral to Lender and Lender's
perfected first priority Lien on the Collateral (and Borrower irrevocably grants Lender the right, at Lender's option, to file any or all of the foregoing), (ii) within two business days of learning
thereof, report to Lender any reclamation, return or repossession of goods in excess of $10,000 (individually or in the aggregate), and (iii) defend the Collateral and Lender's perfected first
priority Lien thereon against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to Lender, and pay all reasonable costs and expenses (including,
without limitation, reasonable in-house documentation and diligence fees and legal expenses and reasonable attorneys' fees and expenses) in connection with such defense, which may at Lender's
discretion be added to the Obligations. 



 6.13    Right of First Refusal  




        If at any time any Borrower or Guarantor (each, a "Credit Party") or any of their respective Subsidiaries or
Affiliates receives from a third party an offer, term sheet or commitment or makes a proposal accepted by any Person (each, an "Offer") which provides
for any type of financing (other than an offering of common stock or other equity securities which do not contain or enjoy any debt or debt-like rights or features, which are not convertible or
exchangeable into debt or debt-like instruments or which may otherwise be characterized, whether for accounting, income tax or any other purposes, as debt) to or for a Credit Party or any of its
Affiliates, such Credit Party, on behalf of itself or such Affiliate, shall immediately notify such third party making the offer of Lender's rights under this Section
6.13, and further shall immediately notify Lender of the Offer in writing (including all material terms of the Offer). Lender shall have thirty (30) calendar days after Receipt
of such notice (the "Option Period") to agree to provide similar financing in the place of such Person upon substantially the same terms and conditions
(or terms more favorable to such Credit Party or Affiliate) as set forth in the Offer. Lender shall notify Credit Party or Affiliate in writing of Lender's acceptance of the Offer pursuant hereto (the  "Acceptance
Notice"), in which case Credit Party shall obtain, or shall cause Affiliate to obtain, such financing from Lender and shall not accept the
Offer from such other Person. If no Acceptance Notice has been Received from Lender within the Option Period, Credit Party or Affiliate may consummate the Offer with the other Person on the terms and
conditions set forth in the Offer (the "Transaction"); provided, however, that none of foregoing or any
failure by Lender to issue an Acceptance Notice shall be construed as a waiver of any of the terms, covenants or conditions of any of the Loan Documents. If the Transaction is not consummated on the
terms set forth in the Offer or with the Person providing the Offer or during the ninety (90) calendar day period following the expiration of the Option Period, Credit Party shall not be permitted,
and shall not permit its Affiliate, to consummate the Transaction without again complying with this Section 6.13. The provisions of this  Section 6.13 shall
survive the payment in full of the Obligations and termination of this Agreement for a period of six months. For purposes of this
Section 6.13, "Lender" shall include CapitalSource Finance LLC and any of its parents, subsidiaries or Affiliates. The provisions of this  Section 6.13
shall not apply to any Offer to an Affiliate of any Borrower or Guarantor (or any of their respective Subsidiaries or Affiliates (other
than the Affiliate receiving the Offer)) if such financing is intended to be used solely for a business conducted by or to be conducted by such Affiliate which is unrelated to the business of any such
Borrower or Guarantor (or any such respective Subsidiaries or Affiliates) as such business exists from time to time or may result from any acquisition, merger or similar transaction how so ever
structured which is the subject of the Offer. 


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 6.14    Taxes and Other Charges  




        (a)    All payments and reimbursements to Lender made under any Loan Document shall be free and clear of and without deduction for all taxes, levies,
imposts, deductions, assessments, charges or
withholdings, and all liabilities with respect thereto of any nature whatsoever, excluding taxes to the extent imposed on Lender's net income or franchise. If Borrower shall be required by law to
deduct any such amounts from or in respect of any sum payable under any Loan Document to Lender, then the sum payable to Lender shall be increased as may be necessary so that, after making all
required deductions, Lender receives an amount equal to the sum it would have received had no such deductions been made. Notwithstanding any other provision of any Loan Document, if at any time after
the Restatement Date (i) any change in any existing law, regulation, treaty or directive or in the interpretation or application thereof, (ii) any new law, regulation, treaty or directive enacted or
any interpretation or application thereof, or (iii) compliance by Lender with any request or directive (whether or not having the force of law) from any Governmental Authority: (A) subjects Lender to
any tax, levy, impost, deduction, assessment, charge or withholding of any kind whatsoever with respect to any Loan Document, or changes the basis of taxation of payments to Lender of any amount
payable thereunder (except for net income taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally by federal, state or local taxing authorities with respect to interest or
commitment fees or other fees payable hereunder or changes in the rate of tax on the overall net income of Lender), or (B) imposes on Lender any other condition or increased cost in connection with
the transactions contemplated thereby or participations therein; and the result of any of the foregoing is to increase the cost to Lender of making or continuing any Loan hereunder or to reduce any
amount receivable hereunder, then, in any such case, Borrower shall promptly pay to Lender any additional amounts necessary to compensate Lender, on an after-tax basis, for such additional cost or
reduced amount as determined by Lender. If Lender becomes entitled to claim any additional amounts pursuant to this Section 6.14 it shall promptly (but
in any event within ninety (90) days of becoming aware thereof) notify Borrower of the event by reason of which Lender has become so entitled and a detailed calculation thereof, and each such notice
of additional amounts payable pursuant to this Section 6.14 submitted by Lender to Borrower shall, absent manifest error, be final, conclusive and
binding for all purposes. 


        (b)    Borrower
shall promptly, and in any event within five (5) Business Days after Borrower or any authorized officer of Borrower obtains knowledge thereof, notify Lender in
writing of any oral or written communication from the Internal Revenue Service or otherwise with respect to any (i) tax investigations, relating to the Borrower directly, or relating to any
consolidated tax return which was filed on behalf of Borrower, (ii) notices of tax assessment or possible tax assessment, (iii) years that are designated open pending tax examination or audit, and
(iv) information that could give rise to an IRS tax liability or assessment. 



 6.15    Payroll Taxes  




        Without limiting or being limited by any other provision of any Loan Document, Borrower at all times shall retain and use a Person acceptable to Lender to
process, manage and pay its payroll taxes and shall cause to be delivered to Lender within ten (10) calendar days after the end of each calendar month a report of its payroll taxes for the immediately
preceding calendar month and evidence of payment thereof. Lender acknowledges that Paychex is an acceptable company engaged by Borrower to process, manage and pay its payroll taxes as of the Closing
Date. Borrower acknowledges that in the event Borrower wishes to remove Paychex as the company engaged to process, manage and pay its payroll taxes, it will not do so until such time that Lender has
consented in writing to such change, which consent will not be unreasonably withheld. 


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 6.16    Inventory Covenants  




        With respect to the Inventory, Borrower: (a) shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate records
itemizing and describing the kind, type, quality and quantity of Inventory, Borrower's cost therefore and daily withdrawals therefrom and additions thereto; (b) shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of Lender, which consent shall not be unreasonably denied or delayed, except for sales of Inventory in the ordinary course of
Borrower's business and except to move Inventory directly from one location set forth or permitted herein to another such location; (c) shall produce, use, store, ship and maintain the Inventory with
all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act
of 1938, as amended and all rules, regulations and orders related thereto); (d) assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of
the Inventory; (e) shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate Borrower to repurchase such Inventory except as set
forth on Schedule 5.20; (f) shall keep the Inventory in good and marketable condition; and (g) shall not, without prior written notice to Lender,
acquire or accept any Inventory on consignment or approval except as set forth on Schedule 5.20. 


VII.    NEGATIVE COVENANTS  


        Each Borrower, jointly and severally, covenants and agrees that, until full performance and satisfaction, and indefeasible payment in full in cash, of all of the
Obligations and termination of this Agreement: 



 7.1    Financial Covenants  




        Borrower shall not violate the financial covenants set forth on Annex I to this Agreement, which is incorporated
herein and made a part hereof. 



 7.2    Permitted Indebtedness  




        Borrower shall not create, incur, assume or suffer to exist any Indebtedness, except the following (collectively, "Permitted
Indebtedness"): (i) Indebtedness under the Loan Documents, (ii) any Indebtedness set forth on Schedule 7.2, (iii) Capitalized
Lease Obligations incurred after the Closing Date and Indebtedness incurred pursuant to purchase money Liens permitted by Section 7.3(v), provided that
the aggregate amount of such Capitalized Lease Obligations and purchase money indebtedness outstanding at any time shall not exceed $75,000, (iv) Indebtedness in connection with advances made by a
stockholder in order to cure any default of the financial covenants set forth on Annex I; provided,
however, that such Indebtedness shall be on an unsecured basis, subordinated in right of repayment and remedies to all of the Obligations and to all of Lender's rights pursuant
to a subordination agreement in form and substance satisfactory to Lender; (v) accounts payable to trade creditors and current operating expenses (other than for borrowed money) which are not aged
more than 120 calendar days from the billing date or more than 30 days from the due date, in each case incurred in the ordinary course of business and paid within such time period, unless the same are
being contested in good faith and by appropriate and lawful proceedings and such reserves, if any, with respect thereto as are required by GAAP and deemed adequate by Borrower's independent
accountants shall have been reserved; (vi) borrowings incurred in the ordinary course of business and not exceeding $10,000 individually or in the aggregate outstanding at any one time,  provided, however, that such Indebtedness shall be on an unsecured basis, subordinated in right of repayment and remedies to all of the Obligations and
to all of Lender's rights pursuant to a subordination agreement in form and substance satisfactory to Lender; and (vii) Permitted Subordinated Debt. Borrower shall not make prepayments on any existing
or future Indebtedness in excess of $10,000 to any Person other 


6







 

than
to Lender or to the extent specifically permitted by this Agreement, as required under the Merger Documents or any subsequent agreement between Borrower and Lender. 



 7.3    Permitted Liens  




        Borrower shall not create, incur, assume or suffer to exist any Lien upon, in or against, or pledge of, any of the Collateral or any of its properties or assets
or any of its authorized but unissued or treasury shares, securities or other equity or ownership or partnership interests, whether now owned or hereafter acquired, except the following (collectively,  "Permitted
Liens"): (i) Liens under the Loan Documents or otherwise arising in favor of Lender, (ii) Liens imposed by law for taxes (other than payroll
taxes), assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained by such Person in accordance with GAAP to the satisfaction of Lender in its sole discretion, (iii) (A) statutory Liens of landlords (provided that any
such landlord has executed a Landlord Waiver and Consent in form and substance
satisfactory to Lender) and of carriers, warehousemen (provided that any such warehousemen have executed a Warehouse Waiver and Consent in form and substance satisfactory to Lender), mechanics,
materialmen, and (B) other Liens imposed by law or that arise by operation of law in the ordinary course of business from the date of creation thereof, in each case only for amounts not yet due or
which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by such Person in accordance with
GAAP to the satisfaction of Lender in its sole discretion, (iv) Liens (A) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in
connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment
of Indebtedness), statutory obligations and other similar obligations, or (B) arising as a result of progress payments under government contracts, (v) purchase money Liens (A) securing Indebtedness
permitted under Section 7.2(iii), or (B) in connection with the purchase by such Person of equipment in the normal course of business,  provided that such
payables shall not exceed any limits on Indebtedness provided for herein and shall otherwise be Permitted Indebtedness hereunder, and
(vi) Liens disclosed on Schedule 7.3. 


7









  



 7.4    Investments; New Facilities or Collateral; Subsidiaries  




        Borrower, directly or indirectly, shall not (i) purchase, own, hold, invest in or otherwise acquire obligations or stock or securities of, or any other interest
in, or all or substantially all of the assets of, any Person or any joint venture, or (ii) make or permit to exist any loans, advances or guarantees to or for the benefit of any Person or assume,
guarantee, endorse, contingently agree to purchase or otherwise become liable for or upon or incur any obligation of any Person (other than those created by the Loan Documents and Permitted
Indebtedness and other than (A) trade credit extended in the ordinary course of business, (B) advances for business travel and similar temporary advances made in the ordinary course of business to
officers, directors and employees, and (C) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business). Borrower, directly or
indirectly, shall not purchase, own, operate, hold, invest in or otherwise acquire any facility, property or assets or allow the warehousing, location or storage of any Collateral other than at the
locations set forth on Schedule 5.18B unless Borrower shall provide to Lender at least thirty (30) Business Days prior written notice. Borrower shall
have no Subsidiaries other than those Subsidiaries, if any, existing on the Restatement Date and set forth in Schedule 5.3.



 7.5    Dividends; Redemptions  




        Borrower shall not (i) declare, pay or make any dividend or Distribution on any shares of capital stock or other securities or interests (other than dividends or
Distributions payable in its stock, or split-ups or reclassifications of its stock), (ii) apply any of its funds, property or assets to the acquisition, redemption or other retirement of any capital
stock or other securities or interests or of any options to purchase or acquire any of the foregoing (provided, however, that Borrower may redeem its capital stock from terminated employees (other
than the Employees except to the extent permitted under the Employee Subordination Agreements) pursuant to, but only to the extent required under, the terms of the related employment agreements as
long as no Default or Event of Default has occurred and is continuing or would be caused by or result from the payment thereof and as long as the aggregate amount of payments made to such terminating
employees in any fiscal year does not exceed $50,000), (iii) otherwise make any payments or Distributions to any stockholder, member, partner or other equity owner in such Person's capacity as such,
or (iv) make any payment of any Management or Service Fee; provided, however, Borrower may make payments
in the ordinary course of business in accordance with the terms of the Employment Agreements to the extent that such payments are not otherwise prohibited under the terms of the Employee Subordination
Agreements and payments of Tax Distributions as long as no Event of Default has occurred and is continuing or would result therefrom; provided,  further,
that Borrower shall not make or suffer to exist any such payment described in (i)
through (iii) above if a Default of Event of Default has occurred and is continuing or would result therefrom. 



 7.6    Transactions with Affiliates  




        Borrower shall not enter into or consummate any transaction of any kind with any of its Affiliates or any Guarantor or any of their respective Affiliates other
than: (i) salary, bonus, employee stock option and other compensation and employment arrangements with directors or officers in the ordinary course of business,  provided, that no payment of any bonus
shall be permitted if a Default or Event of Default has occurred and remains in effect or would be caused by or
result from such payment, (ii) Distributions and dividends permitted pursuant to Section 7.5, (iii) transactions with Lender or any Affiliate of Lender,
and (iv) payments permitted under and pursuant to written agreements entered into by and between Borrower and one or more of its Affiliates that both (A) reflect and constitute transactions on overall
terms at least as favorable to Borrower as would be the case in an arm's-length transaction between unrelated parties of equal bargaining power, and (B) are subject to such terms and conditions as
determined by Lender in its sole discretion; provided, that notwithstanding the foregoing 


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clauses
(A) and (B) above Borrower shall not (Y) enter into or consummate any transaction or agreement pursuant to which it becomes a party to any mortgage, note, indenture or guarantee evidencing any
Indebtedness of any of its Affiliates or otherwise to become responsible or liable, as a guarantor, surety or otherwise, pursuant to agreement for any Indebtedness of any such Affiliate, or (Z) make
any payment to any of its Affiliates in excess of $10,000 without the prior written consent of Lender. 



 7.7    Charter Documents; Fiscal Year; Name; Jurisdiction of Organization; Dissolution; Use of Proceeds  




        Except in accordance with the terms of the Merger Documents, Borrower shall not (i) amend, modify, restate or change its certificate of incorporation or formation
or bylaws or similar charter documents in a manner that would be adverse to Lender, (ii) change its fiscal year unless Borrower demonstrates to Lender's satisfaction compliance with the covenants
contained herein for both the fiscal year in effect prior to any change and the new fiscal year period by delivery to Lender of appropriate interim and annual pro forma, historical and current
compliance certificates for such periods and such other information as Lender may reasonably request, (iii) without at least 20 days prior written notice to Lender, change its name or change its
jurisdiction of organization; (iv) amend, alter or suspend or terminate or make provisional in any material way, any Permit without the prior written consent of Lender, which consent shall not be
unreasonably withheld, (v) wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking or that would result in any
of the foregoing, or (vi) use any proceeds of any Advance or Overadvance for "purchasing" or "carrying" "margin stock" as defined in Regulations U, T or X of the Board of Governors of the Federal
Reserve System. 



 7.8    Truth of Statements  




        Borrower shall not furnish to Lender any certificate or other document that contains any untrue statement of a material fact or that omits to state a material
fact necessary to make it not misleading in light of the circumstances under which it was furnished. 



 7.9    IRS Form 8821  




        Borrower shall not alter, amend, restate, or otherwise modify, or withdraw, terminate or re-file the IRS Form 8821 required to be filed pursuant to the Conditions
Precedent in Section 4.1 hereof. 



 7.10    Transfer of Assets  




        Notwithstanding any other provision of this Agreement or any other Loan Document, Borrower shall not sell, lease, transfer, assign or otherwise dispose of any
interest in any properties or assets (other than obsolete equipment or excess equipment no longer needed in the conduct of the business in the ordinary course of business and sales of Inventory in the
ordinary course of business), or agree to do any of the foregoing at any future time, except that: 



        (a)   Borrower
may lease (as lessee) real or personal property or surrender all or a portion of a lease of the same, in each case in the ordinary course of business (so long
as such lease does not create or result in and is not otherwise a Capitalized Lease Obligation prohibited under this Agreement), provided that a
Landlord Waiver and Consent and such other consents as are required by Lender are signed and delivered to Lender with respect to any lease of real or other property, as applicable, if such real or
other property serves as corporate headquarters or a billing office, if any books or records, Accounts or other properties relating to Accounts are located thereat or if other assets in excess of
$10,000 are maintained at such property; 



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        (b)   Borrower
may arrange for the warehousing, fulfillment or storage of Inventory at locations not owned or leased by Borrower, in each case in the ordinary course of
business, provided that a Warehouse Waiver and Consent and such other consents as are required by Lender are signed and delivered to Lender with respect
to any such location; 


        (c)   Borrower
may license or sublicense Intellectual Property or customer lists from third parties in the ordinary course of business,  provided, that such licenses or sublicenses shall not interfere with the business
or other operations of Borrower and that Borrower's rights, title
and/or interest in or to such Intellectual Property and customer lists and interests therein are pledged to Lender as further security for the Obligations and included as part of the Collateral if
permitted in accordance with its terms; and 


        (d)   Borrower
may consummate such other sales or dispositions of property or assets (including any sale or transfer or disposition of all or any part of its assets and
thereupon and within one year thereafter rent or lease the assets so sold or transferred) only to the extent prior written notice has been given to Lender and to the extent Lender has given its prior
written consent thereto, subject in each case to such conditions as may be set forth in such consent. 


 7.11    Payment on Permitted Subordinated Debt  




        Except as permitted by the Subordination Agreement relating to such Permitted Subordinated Debt, Borrower shall not (i) make any prepayment of any part or all of
any Permitted Subordinated Debt, (ii) repurchase, redeem or retire any instrument evidencing any such Permitted Subordinated Debt prior to maturity, or (iii) enter into any agreement (oral or written)
which could in any way be construed to amend, modify, alter or terminate any one or more instruments or agreements evidencing or relating to any Permitted Subordinated Debt in a manner adverse to
Lender, as determined by Lender in its sole discretion. 



 7.12    Merger Documents  




        Borrower shall not amend, modify, supplement or cancel, or waive any other party's compliance with, any material provision of the Merger Documents. 



 7.13    HealthTrans Agreement and Wellpoint Agreement  




        Borrower shall not amend, modify, supplement or cancel, or waive any other party's compliance with, any material provision of the HealthTrans Agreement or the
Wellpoint Agreement in a manner which is materially adverse to the rights and benefits of the Lender under this Agreement or under the Loan Documents or which is reasonably expected to have a Material
Adverse Effect. 



 7.14    NationsHealth Supply L.L.C.  




        Borrower shall dissolve NationsHealth Supply L.L.C. or cause NationsHealth Supply L.L.C. to become a Guarantor under this Agreement on or before September 30,
2004. Borrower shall not permit NationsHealth Supply L.L.C. to conduct any business operations or activities or change its inactive status prior to its dissolution or the date upon which it becomes a
Guarantor. 


VIII.    EVENTS OF DEFAULT  


        The occurrence of any one or more of the following shall constitute an "Event of Default:" 



        (a)   Borrower
shall fail to pay any amount on the Obligations or provided for in any Loan Document when due (whether on any payment date, at maturity, by reason of
acceleration, by notice of intention to prepay, by required prepayment or otherwise); 



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        (b)   any
representation, statement or warranty made or deemed made by Borrower or any Guarantor in any Loan Document or in any other certificate, document, report or opinion
delivered in conjunction with any Loan Document to which it is a party, shall not be true and correct in all material respects or shall have been false or misleading in any material respect on the
date when made or deemed to have been made (except to the extent already qualified by materiality, in which case it shall be true and correct in all respects and shall not be false or misleading in
any respect); 


        (c)   Borrower
or any Guarantor or other party thereto other than Lender shall be in violation, breach or default of, or shall fail to perform, observe or comply with any
covenant, obligation or agreement set forth in, any Loan Document and such violation, breach, default or failure shall not be cured within the applicable period set forth in the applicable Loan
Document; provided that, with respect to the affirmative covenants set forth in Article VI (other than  Sections 6.1(c), 6.2, 6.3(i),
(ii) and (iii), 6.5, 6.8, 6.9 and 6.11 for which there shall be no cure period), there shall be a fifteen (15) calendar
day cure period commencing from the earlier of (i) Receipt by such Person of written notice of such breach, default, violation or failure, and (ii) the time at which such Person or any authorized
officer thereof knew or became aware, or should have known or been aware, of such failure, violation, breach or default, but no Advances will be made during the cure period; 


        (d)   (i)    any
of the Loan Documents ceases to be in full force and effect, or (ii) any Lien created thereunder ceases to constitute a valid perfected first
priority Lien on the Collateral in accordance with the terms thereof (other than as a result of the action or inaction of Lender), or Lender ceases to have a valid perfected first priority security
interest in any of the Collateral or any securities pledged to Lender pursuant to the Security Documents; 



        (e)   one
or more tax assessments, judgments or decrees is rendered against any Borrower or Guarantor in an amount in excess of $10,000 individually or $50,000 in the
aggregate, which is/are not satisfied, stayed, vacated or discharged of record within thirty (30) calendar days of being rendered but no Advances will be made before the judgment is stayed, vacated or
discharged; 


        (f)    (i)    any
default occurs, which is not cured or waived, (x) in the payment of any amount with respect to any Indebtedness for borrowed money (other than the
Obligations) of any Borrower or Guarantor in excess of $10,000, (y) in the performance, observance or fulfillment of any provision contained in any agreement, contract, document or instrument to which
any Borrower or Guarantor is a party or to which any of their properties or assets are subject or bound under or pursuant to which any Indebtedness was issued, created, assumed, guaranteed or secured
and such default continues for more
than any applicable grace period or permits the holder of any Indebtedness to accelerate the maturity thereof, or (z) in the performance, observance or fulfillment of any provision contained in any
agreement, contract, document or instrument between any Borrower or Guarantor and Lender or any Affiliate of Lender (other than the Loan Documents), or (ii) any Indebtedness of any Borrower or
Guarantor is declared to be due and payable or is required to be prepaid (other than by a regularly scheduled payment) prior to the stated maturity thereof, or any obligation of such Person for the
payment of Indebtedness (other than the Obligations) is not paid when due or within any applicable grace period, or any such obligation becomes or is declared to be due and payable before the
expressed maturity thereof, or there occurs an event which, with the giving of notice or lapse of time, or both, would cause any such obligation to become, or allow any such obligation to be declared
to be, due and payable; 


        (g)   any
Borrower or Guarantor shall (i) be unable to pay its debts generally as they become due, (ii) have total liabilities (including contingent, subordinated, unmatured
and unliquidated liabilities) that exceed its assets, at a Fair Valuation, (iii) have an unreasonably small capital base 



35







 




with
which to engage in its anticipated business, (iv) file a petition under any insolvency statute, (v) make a general assignment for the benefit of its creditors, (vi) commence a proceeding for the
appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property, or (vii) file a petition seeking reorganization or liquidation or
similar relief under any Debtor Relief Law or any other applicable law or statute; 


        (h)   a
court of competent jurisdiction shall (A) enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of any Borrower or
Guarantor or the whole or any substantial part of any such Person's properties, which shall continue unstayed and in effect for a period of thirty (30) calendar days, (B) shall approve a petition
filed against any Borrower or Guarantor seeking reorganization, liquidation or similar relief under the any Debtor Relief Law or any other applicable law or statute, which is not dismissed within
thirty (30) calendar days or, (C) under the provisions of any Debtor Relief Law or other applicable law or statute, assume custody or control of any Borrower or Guarantor or of the whole or any
substantial part of any such Person's properties, which is not irrevocably relinquished within thirty (30) calendar days, or (ii) there is commenced against any Borrower or Guarantor any proceeding or
petition seeking reorganization, liquidation or similar relief under any Debtor Relief Law or any other applicable law or statute and either (A) any such proceeding or petition is not unconditionally
dismissed within thirty (30) calendar days after the date of commencement, or (B) any Borrower or Guarantor takes any action to indicate its approval of or consent to any such proceeding or petition,
but no Advances will be made before any such order, judgment or decree described above is stayed, vacated or discharged, any such petition described above is dismissed, or any such custody or control
described above is relinquished; 


        (i)    (i)    any
Change of Control occurs or any agreement or commitment to cause or that may result in any such Change of Control is entered into, (ii) any Material
Adverse Effect, or Material Adverse Change occurs or is reasonably expected to occur, (iii) any Liability Event occurs or is reasonably expected to occur, or (iv) any Borrower or Guarantor ceases a
material portion of its business operations as currently conducted; 


        (j)    Lender
receives any indication or evidence that any Borrower or Guarantor may have directly or indirectly been engaged in any type of activity which, in Lender's
judgment, is likely to result in forfeiture of any property to any Governmental Authority which shall have continued unremedied for a period of ten (10) calendar days after written notice from Lender
(but no Advances or Overadvances will be made before any such activity ceases); 


        (k)   an
Event of Default occurs under any other Loan Document; 


        (l)    uninsured
damage to, or loss, theft or destruction of, any portion of the Collateral occurs that exceeds $10,000 in the aggregate; 


        (m)  any
Borrower or Guarantor or any of their respective directors or senior officers is criminally indicted or convicted under any law that could lead to a forfeiture of
any Collateral; 


        (n)   the
issuance of any process for levy, attachment or garnishment or execution upon or prior to any judgment against any Borrower or Guarantor or any of their property or
assets which is/are not satisfied, stayed, vacated or discharged of record within thirty (30) calendar days of being issued; 


        (o)   any
Borrower or Guarantor does, or enters into or becomes a party to any agreement or commitment to do, or cause to be done, any of the things described in this  Article VIII or otherwise prohibited by any
Loan Document (subject to any cure periods set forth therein); 



        (p)   any
default occurs with respect to Borrower, which is not cured or waived, in the performance, observance or fulfillment of any provision contained in the Merger
Documents; 



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        (q)   any
Employment Agreements shall be terminated in a manner which requires the payment of termination benefits in accordance with Section 5(b) thereof or any "Notice of
Enforcement Action" or "Notice of Final Determination" shall be delivered to Lender pursuant to the Employee Subordination Agreement; or 



        (r)   Borrower
or any Guarantor or other party thereto other than Lender shall be in violation, breach or default of, or shall fail to perform, observe or comply with any
covenant, obligation or agreement set forth in, any document governing the relations between any Borrower or any Guarantor with any Affiliate and such violation, breach, default or failure shall not
be cured within the applicable period set forth in that document; 




then,
and in any such event, notwithstanding any other provision of any Loan Document, Lender may, without notice or demand, do any of the following: (i) terminate its obligations to make Advances and
Overadvances hereunder, whereupon the same shall immediately terminate and (ii) declare all or any of the Notes, all interest thereon and all other Obligations to be due and payable immediately
(except in the case of an Event of Default under Section 8(d), (g),  (h) or (i)(iii)
, in which event all of the foregoing shall automatically and without further act by
Lender be due and payable, provided that, with respect to non-material breaches or violations that constitute Events of Default under clause (ii) of  Section 8(d), there shall be a three (3) Business Day cure period (but no Advances or Overadvances will be made during any such cure period) commencing
from the earlier of (A) Receipt by the applicable Person of written notice of such breach or violation or of any event, fact or circumstance constituting or resulting in any of the foregoing, and (B)
the time at which such Person or any authorized officer thereof knew or became aware, or should have known or been aware, of such breach or violation and resulting Event of Default or of any event,
fact or circumstance constituting or resulting in any of the foregoing), in each case without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by
Borrower. 


IX.    RIGHTS AND REMEDIES AFTER DEFAULT  



 9.1    Rights and Remedies  




        (a)   In
addition to the acceleration provisions set forth in Article VIII above, upon the occurrence and continuation of an
Event of Default, Lender shall have the right to exercise any and all rights, options and remedies provided for in the Loan Documents, under the UCC or at law or in equity, including, without
limitation, the right to (i) apply any property of any Borrower held by Lender to reduce the Obligations, (ii) foreclose the Liens created under the Security Documents, (iii) realize upon, take
possession of and/or sell any Collateral or securities pledged (other than Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court order or compliance with
applicable law) with or without judicial process, (iv) exercise all rights and powers with respect to the Collateral as any Borrower, as applicable, might exercise (other than with respect to
Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court order or compliance with applicable law), (v) collect and send notices regarding the Collateral
(other than with respect to Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court order or compliance with applicable law), with or without judicial
process, (vi) by its own means or with judicial assistance, enter any premises at which Collateral and/or pledged securities are located, or render any of the foregoing unusable or dispose of the
Collateral and/or pledged securities on such premises without any liability for rent, storage, utilities, or other sums, and no Borrower shall resist or interfere with such action, (vii) at Borrower's
expense, require that all or any part of the Collateral be assembled and made available to Lender at any place designated by Lender, (viii) reduce or otherwise change the Facility Cap, and/or (ix)
relinquish or abandon any Collateral or securities pledged or any Lien thereon. Notwithstanding any provision of any Loan Document, Lender shall have the right, at any time that Borrower fails to do
so, and from time to time, without prior notice, to: (i) obtain insurance covering any of the Collateral to the extent required 


37







 

hereunder
or Lender to the extent required under Landlord Waiver and Consent or Warehouse Waiver and Consent; (ii) pay for the performance of any of Obligations; (iii) discharge taxes or Liens on any
of the Collateral that are in violation of any Loan document unless Borrower is in good faith with due diligence by appropriate proceedings contesting those items; and (iv) pay for the maintenance and
preservation of the Collateral, including the payment of rent, warehouse fees or other per diem charges if required under any Landlord Waiver and Consent or Warehouse Waiver and Consent. Such expenses
and advances shall be added to the Obligations until reimbursed to Lender and shall be secured by the Collateral, and such payments by Lender shall not be construed as a waiver by Lender of any Event
of Default or any other rights or remedies of Lender. 


        (b)   Borrower
agrees that notice received by it at least ten (10) calendar days before the time of any intended public sale, or the time after which any private sale or other
disposition of Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any perishable Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold immediately by Lender without prior notice to Borrower. At any sale or disposition of Collateral or securities pledged,
Lender may (to the extent permitted by applicable law) purchase all or any part thereof free from any right of redemption by any Borrower which right is hereby waived and released. Borrower covenants
and agrees not to, and not to permit or cause any of its Subsidiaries to, interfere with or impose any obstacle to Lender's exercise of its rights and remedies with respect to the Collateral. Lender,
in dealing with or disposing of the Collateral or any part thereof, shall not be required to give priority or preference to any item of Collateral or otherwise to marshal assets or to take possession
or sell any Collateral with judicial process. 



 9.2    Application of Proceeds  




        In addition to any other rights, options and remedies Lender has under the Loan Documents, the UCC, at law or in equity, all dividends, interest, rents, issues,
profits, fees, revenues, income and other proceeds collected or received from collecting, holding, managing, renting, selling, or otherwise disposing of all or any part of the Collateral or any
proceeds thereof upon exercise of its remedies hereunder shall be applied in the following order of priority: (i) first, to the payment of all costs and
expenses of such collection, storage, lease, holding, operation, management, sale, disposition or delivery and of conducting Borrower's business and of maintenance, repairs, replacements, alterations,
additions and improvements of or to the Collateral, and to the payment of all sums which Lender may be required or may elect to pay, if any, for taxes, assessments, insurance and other charges upon
the Collateral or any part thereof, and all other payments that Lender may be required or authorized to make under any provision of this Agreement (including, without limitation, in each such case,
in-house documentation and diligence fees and legal expenses, search, audit, recording, professional and filing fees and expenses and reasonable attorneys' fees and all expenses, liabilities and
advances made or incurred in connection therewith); (ii) second, to the payment of all Obligations as provided herein; (iii)  third, to the satisfaction of
Indebtedness secured by any subordinate security interest of record in the Collateral if written notification of demand
therefor is received before distribution of the proceeds is completed, provided, that, if requested by Lender, the holder of a subordinate security
interest shall furnish reasonable proof of its interest, and unless it does so, Lender need not address its claims; and (iv) fourth, to the payment of
any surplus then remaining to Borrower, unless otherwise provided by law or directed by a court of competent jurisdiction, provided that Borrower shall
be liable for any deficiency if such proceeds are insufficient to satisfy the Obligations or any of the other items referred to in this section. 



 9.3    Rights of Lender to Appoint Receiver  




        Without limiting and in addition to any other rights, options and remedies Lender has under the Loan Documents, the UCC, at law or in equity, upon the occurrence
and continuation of an Event of 


38







 

Default,
Lender shall have the right to apply for and have a receiver appointed by a court of competent jurisdiction in any action taken by Lender to enforce its rights and remedies in order to
manage, protect and preserve the Collateral and continue the operation of the business of Borrower and to collect all revenues and profits thereof and apply the same to the payment of all expenses and
other charges of such receivership including the compensation of the receiver and to the payments as aforesaid until a sale or other disposition of such Collateral shall be finally made and
consummated. 



 9.4    Rights and Remedies not Exclusive  




        Lender shall have the right in its sole discretion to determine which rights, Liens and/or remedies Lender may at any time pursue, relinquish, subordinate or
modify, and such determination will not in any way modify or affect any of Lender's rights, Liens or remedies under any Loan Document, applicable law or equity. The enumeration of any rights and
remedies in any Loan Document is not intended to be exhaustive, and all rights and remedies of Lender described in any Loan Document are cumulative and are not alternative to or exclusive of any other
rights or remedies which Lender otherwise may have. The partial or complete exercise of any right or remedy shall not preclude any other further exercise of such or any other right or remedy. 


X.    WAIVERS AND JUDICIAL PROCEEDINGS  



 10.1    Waivers  




        Except as expressly provided for herein, Borrower hereby waives setoff, counterclaim, demand, presentment, protest, all defenses with respect to any and all
instruments and all notices and demands of any description, and the pleading of any statute of limitations as a defense to any demand under any Loan Document. Borrower hereby waives any and all
defenses and counterclaims it may have or could interpose in any action or procedure brought by Lender to obtain an order of court recognizing the assignment of, or Lien of Lender in and to, any
Collateral, whether or not payable by a Medicaid/Medicare Account Debtor. With respect to any action hereunder, Lender conclusively may rely upon, and shall incur no liability to Borrower in acting
upon, any request or other communication that Lender reasonably believes to have been given or made by a person authorized on Borrower's behalf, whether or not such person is listed on the incumbency
certificate delivered pursuant to Section 4.1 hereof. In each such case, Borrower hereby waives the right to dispute Lender's action based upon such request or other communication, absent manifest
error. 



 10.2    Delay; No Waiver of Defaults  




        No course of action or dealing, renewal, release or extension of any provision of any Loan Document, or single or partial exercise of any such provision, or
delay, failure or omission on Lender's part in enforcing any such provision shall affect the liability of any Borrower or Guarantor or operate as a waiver of such provision or affect the liability of
any Borrower or Guarantor or preclude any other or further exercise of such provision. No waiver by any party to any Loan Document of any one or more defaults by any other party in the performance of
any of the provisions of any Loan Document shall operate or be construed as a waiver of any future default, whether of a like or different nature, and each such waiver shall be limited solely to the
express terms and provisions of such waiver. Notwithstanding any other provision of any Loan Document, by executing this Agreement and/or by making Advances or Overadvances on or after the Restatement
Date, Lender does not waive any breach of any representation or warranty under any Loan Document, and all of Lender's claims and rights resulting from any such breach or misrepresentation are
specifically reserved. 


39







 

 10.3    Jury Waiver  




        EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN ANY WAY
CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY. 



 10.4    Cooperation in Discovery and Litigation  




        In any litigation, arbitration or other dispute resolution proceeding relating to any Loan Document, Borrower waives any and all defenses, objections and
counterclaims it may have or could interpose with
respect to (i) any of its directors, officers, employees or agents being deemed to be employees or managing agents of Borrower for purposes of all applicable law or court rules regarding the
production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise), (ii) Lender's counsel examining any such individuals as if under cross-examination and using any
discovery deposition of any of them as if it were an evidence deposition, and/or (iii) using all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and
in the manner requested by Lender, all Persons, documents (whether in tangible, electronic or other form) and/or other things under its control and relating to the dispute. 


40









   XI.    EFFECTIVE DATE AND TERMINATION  



 11.1    Termination and Effective Date Thereof  




        (a)   Subject
to Lender's right to terminate and cease making Advances and Overadvances upon or after any Event of Default, this Agreement shall continue in full force and
effect until the full performance and indefeasible payment in cash of all Obligations, unless terminated sooner as provided in this Section 11.1.
Borrower may terminate this Agreement at any time upon not less than sixty (60) calendar days' prior written notice to Lender and upon full performance and indefeasible payment in full in cash of all
Obligations on or prior to such 60th calendar day after Receipt by Lender of such written notice; provided,  however, that, notwithstanding any
other provision of any Loan Document, Borrower shall have no right to terminate this Agreement until after the first
anniversary of the Closing Date. All of the Obligations shall be immediately due and payable upon any such termination on the termination date stated in any notice of termination (the  "Termination Date"); provided that, notwithstanding any other provision of any Loan Document, the
Termination Date shall be effective no earlier than the first Business Day of the month following the expiration of the sixty (60) calendar days' prior written notice period. Notwithstanding any other
provision of any Loan Document, no termination of this Agreement shall affect Lender's rights or any of the Obligations existing as of the effective date of such termination, and the provisions of the
Loan Documents shall continue to be fully operative until the Obligations have been fully performed and indefeasibly paid in cash in full. The Liens granted to Lender under the Security Documents and
the financing statements filed pursuant thereto and the rights and powers of Lender shall continue in full force and effect notwithstanding the fact that Borrower's borrowings hereunder may from time
to time be in a zero or credit position until all of the Obligations have been fully performed and indefeasibly paid in full in cash. 


        (b)   If
(i) Borrower terminates the Revolving Facility under this Section 11.1, (ii) Borrower voluntarily or involuntarily
repays the Obligations (other than reductions to zero of the outstanding balance of the Revolving Facility resulting from the ordinary course operation of the provisions of  Section 2.5), whether by
virtue of Lender's exercising its right of set off or otherwise; (iii) the Obligations are accelerated by Lender (each of the
events described in (i), (ii) and (iii) above being hereinafter referred to as, a "Revolver Termination"), then at the effective date of any such
Revolver Termination, Borrower shall pay Lender (in addition to the then outstanding principal, accrued interest and other Obligations relating to the Revolving Facility pursuant to the terms of this
Agreement and any other Loan Document), to compensate Lender for the loss of bargain and not as a penalty, an amount equal to the applicable Minimum Termination Fee. 



 11.2    Survival  




        All obligations, covenants, agreements, representations, warranties, waivers and indemnities made by Borrower in any Loan Document shall survive the execution and
delivery of the Loan Documents, the Closing, the making of the Advances and any termination of this Agreement until all Obligations are fully performed and indefeasibly paid in full in cash. The
obligations and provisions of Sections 3.4, 3.5, 6.13, 10.1, 10.3, 11.1, 11.2, 12.4, 12.7 and 12.10
shall survive termination of the Loan Documents and any payment, in full or in part, of the Obligations. 


XII.    MISCELLANEOUS  



 12.1    Governing Law; Jurisdiction; Service of Process; Venue  




        The Loan Documents shall be governed by and construed in accordance with the internal laws of the State of Maryland without giving effect to its choice of law
provisions. Any judicial proceeding against Borrower with respect to the Obligations, any Loan Document or any related agreement may be brought in any federal or state court of competent jurisdiction
located in the State of Maryland. By execution and delivery of each Loan Document to which it is a party, Borrower (i) accepts the non- 


41







 

exclusive
jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any judgment rendered thereby, (ii) waives personal service of process, (iii) agrees that service of process upon
it may be made by certified or registered mail, return receipt requested, pursuant to Section 12.5 hereof, (iv) waives any objection to jurisdiction and
venue of any action instituted hereunder and agrees not to assert any defense based on lack of jurisdiction, venue or convenience, and (v) agrees that this loan was made in Maryland, that Lender has
accepted in Maryland Loan Documents executed by Borrower and has disbursed Advances under the Loan Documents in Maryland. Nothing shall affect the right of Lender to serve process in any manner
permitted by law or shall limit the right of Lender to bring proceedings against Borrower in the courts of any other jurisdiction having jurisdiction. Any judicial proceedings against Lender
involving, directly or indirectly, the Obligations, any Loan Document or any related agreement shall be brought only in a federal or state court located in the State of Maryland. All parties
acknowledge that they participated in the negotiation and drafting of this Agreement and that, accordingly, no party shall move or petition a court construing this Agreement to construe it more
stringently against one party than against any other. 



 12.2    Successors and Assigns; Participations; New Lenders  




        The Loan Documents shall inure to the benefit of Lender, Transferees and all future holders of any Note, the Obligations and/or any of the Collateral, and each of
their respective successors and assigns. Each Loan Document shall be binding upon the Persons' other than Lender that are parties thereto and their respective successors and assigns, and no such
Person may assign, delegate or transfer any Loan Document or any of its rights or obligations thereunder without the prior written consent of Lender. No rights are intended to be created under any
Loan Document for the benefit of any third party donee, creditor or incidental beneficiary of any Borrower or Guarantor. Nothing contained in any Loan Document shall be construed as a delegation to
Lender of any other Person's duty of performance. BORROWER ACKNOWLEDGES AND AGREES THAT Lender at any time and from time to time may (I) DIVIDE AND RESTATE ANY NOTE, AND/OR (II) sell, assign or GRANT
PARTICIPATING INTERESTS IN OR transfer all or any part of its rights or obligations under ANY LOAN DOCUMENT, Note, the obligations AND/OR the collateral TO OTHER PERSONS (EACH SUCH TRANSFEREE,
ASSIGNEE OR PURCHASER, A "TRANSFEREE"). Each Transferee shall have all of the rights and benefits with respect to the Obligations, Notes, Collateral
and/or Loan Documents held by it as fully as if the original holder thereof, and either Lender or any Transferee
may be designated as the sole agent to manage the transactions and obligations contemplated therein; provided that, notwithstanding anything to the
contrary in any Loan Document, Borrower shall not be obligated to pay under this Agreement to any Transferee any sum in excess of the sum which Borrower would have been obligated to pay to Lender had
such participation not been effected. Notwithstanding any other provision of any Loan Document, Lender may disclose to any Transferee all information, reports, financial statements, certificates and
documents obtained under any provision of any Loan Document. 



 12.3    Application of Payments  




        To the extent that any payment made or received with respect to the Obligations is subsequently invalidated, determined to be fraudulent or preferential, set
aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other Person under any Debtor Relief Law, common law or equitable cause or any other law, then the
Obligations intended to be satisfied by such payment shall be revived and shall continue as if such payment had not been received by Lender. Any payments with respect to the Obligations received shall
be credited and applied in such manner and order as Lender shall decide in its sole discretion. 


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 12.4    Indemnity  




        Each Borrower jointly and severally shall indemnify Lender, its Affiliates and its and their respective managers, members, officers, employees, Affiliates,
agents, representatives, successors, assigns, accountants and attorneys (collectively, the "Indemnified Persons") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable fees and
disbursements of counsel and in-house documentation and diligence fees and legal expenses) which may be imposed on, incurred by or asserted against any Indemnified Person with respect to or arising
out of, or in any litigation, proceeding or investigation instituted or conducted by any Person with respect to any aspect of, or any transaction contemplated by or referred to in, or any matter
related to, any Loan Document or any agreement, document or transaction contemplated thereby, whether or not such Indemnified Person is a party thereto, except to the extent that any of the foregoing
arises out of the gross negligence or willful misconduct of such Indemnified Person. If any Indemnified Person uses in-house counsel for any purpose for which any Borrower is responsible to pay or
indemnify, each Borrower expressly agrees that its indemnification obligations include reasonable charges for such work commensurate with the fees that would otherwise be charged by outside legal
counsel selected by such Indemnified Person in its sole discretion for the work performed. Lender agrees to give Borrower reasonable notice of any event of which Lender becomes aware for which
indemnification may be
required under this Section 12.4, and Lender may elect (but is not obligated) to direct the defense thereof, provided that the selection of counsel
shall be subject to Borrower's consent, which consent shall not be unreasonably withheld or delayed. Any Indemnified Person may, in its reasonable discretion, take such actions as it deems necessary
and appropriate to investigate, defend or settle any event or take other remedial or corrective actions with respect thereto as may be necessary for the protection of such Indemnified Person or the
Collateral. Notwithstanding the foregoing, if any insurer agrees to undertake the defense of an event (an "Insured Event"), Lender agrees not to
exercise its right to select counsel to defend the event if that would cause any Borrower's insurer to deny coverage; provided,  however, that Lender
reserves the right to retain counsel to represent any Indemnified Person with respect to an Insured Event at its sole cost and
expense. To the extent that Lender obtains recovery from a third party other than an Indemnified Person of any of the amounts that any Borrower has paid to Lender pursuant to the indemnity set forth
in this Section 12.4, then Lender shall promptly pay to such Borrower the amount of such recovery. 



 12.5    Notice  




        Any notice or request under any Loan Document shall be given to any party to this Agreement at such party's address set forth beneath its signature on the
signature page to this Agreement, or at such other address as such party may hereafter specify in a notice given in the manner required under this Section
12.5. Any notice or request hereunder shall be given only by, and shall be deemed to have been received upon (each, a  "Receipt"): (i) registered or certified mail, return receipt
requested, on the date on which received as indicated in such return receipt, (ii) delivery
by a nationally recognized overnight courier, one (1) Business Day after deposit with such courier, or (iii) facsimile transmission, in each case upon telephone or further electronic communication
from the recipient acknowledging receipt (whether automatic or manual from recipient), as applicable. 



 12.6    Severability; Captions; Counterparts; Facsimile Signatures  




        If any provision of any Loan Document is adjudicated to be invalid under applicable laws or regulations, such provision shall be inapplicable to the extent of
such invalidity without affecting the validity or enforceability of the remainder of the Loan Documents which shall be given effect so far as possible. The captions in the Loan Documents are intended
for convenience and reference only and shall not affect the meaning or interpretation of the Loan Documents. The Loan Documents may be 


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executed
in one or more counterparts (which taken together, as applicable, shall constitute one and the same instrument) and by facsimile transmission, which facsimile signatures shall be considered
original executed counterparts. Each party to this Agreement agrees that it will be bound by its own facsimile signature and that it accepts the facsimile signature of each other party. 



 12.7    Expenses  




        Borrower shall pay, whether or not the Closing occurs, all reasonable costs and expenses incurred by Lender and/or its Affiliates, including, without limitation,
documentation and diligence fees and expenses, all search, audit, appraisal, recording, professional and filing fees and expenses and all other reasonable out-of-pocket charges and expenses
(including, without limitation, UCC and judgment and tax lien searches and UCC filings and fees for post-Closing UCC and judgment and tax lien searches and wire transfer fees and audit expenses), and
reasonable attorneys' fees and expenses, (i) in any effort to enforce, protect or collect payment of any Obligation or to enforce any Loan Document or any related agreement, document or instrument,
(ii) in connection with entering into, negotiating, preparing, reviewing and executing the Loan Documents and/or any related agreements, documents or instruments, (iii) arising in any way out of
administration of the Obligations, (iv) in connection with instituting, maintaining, preserving, enforcing and/or foreclosing on Lender's Liens in any of the Collateral or securities pledged under the
Loan Documents, whether through judicial proceedings or otherwise, (v) in defending or prosecuting any actions, claims or proceedings arising out of or relating to Lender's transactions with Borrower,
(vi) in seeking, obtaining or receiving any advice with respect to its rights and obligations under any Loan Document and any related agreement, document or instrument, and/or (vii) in connection with
any modification, restatement, supplement, amendment, waiver or extension of any Loan Document and/or any related agreement, document or instrument. All of the foregoing shall be charged to Borrower's
account and shall be part of the Obligations. If Lender or any of its Affiliates uses in-house counsel for any purpose under any Loan Document for which Borrower is responsible to pay or indemnify,
Borrower expressly agrees that its Obligations include reasonable charges for such work commensurate with the fees that would otherwise be charged by outside legal counsel selected by Lender or such
Affiliate in its sole discretion for the work performed. Without limiting the foregoing, Borrower shall pay all taxes (other than taxes based upon or measured
by Lender's income or revenues or any personal property tax), if any, in connection with the issuance of any Note and the filing and/or recording of any documents and/or financing statements. 



 12.8    Entire Agreement  




        This Agreement and the other Loan Documents to which Borrower is a party constitute the entire agreement between Borrower and Lender with respect to the subject
matter hereof and thereof, and supersede all prior agreements and understandings, if any, relating to the subject matter hereof or thereof. Any promises, representations, warranties or guarantees not
herein contained and hereinafter made shall have no force and effect unless in writing signed by Borrower and Lender. No provision of this Agreement may be changed, modified, amended, restated,
waived, supplemented, discharged, canceled or terminated orally or by any course of dealing or in any other manner other than by an agreement in writing signed by Lender and Borrower. Each party
hereto acknowledges that it has been advised by counsel in connection with the negotiation and execution of this Agreement and is not relying upon oral representations or statements inconsistent with
the terms and provisions hereof. 



 12.9    Lender Approvals  




        Unless expressly provided herein to the contrary, any approval, consent, waiver or satisfaction of Lender with respect to any matter that is subject of any Loan
Document may be granted or withheld by Lender in its sole and absolute discretion. 


44







 

 12.10    Publicity  




        Borrower hereby agrees that Lender or any Affiliate of Lender may (i) disclose a general description of transactions arising under the Loan Documents for
advertising, marketing or other similar purposes and (ii) use Borrower's or any Guarantor's name, logo or other indicia germane to such party in connection with such advertising, marketing or other
similar purposes. Borrower further agrees that except as required by law or regulation, including the filing of this Agreement with the United States Securities and Exchange Commission, Borrower shall
not use Lender's name, logo or other indicia
germane to Lender without the prior consent of Lender, which consent shall not be unreasonably withheld. 



 12.11    Release of Lender  




        Notwithstanding any other provision of any Loan Document, Borrower voluntarily, knowingly, unconditionally and irrevocably, with specific and express intent, for
and on behalf of itself, its managers, members, directors, officers, employees, stockholders, Affiliates, agents, representatives, accountants, attorneys, successors and assigns and their respective
Affiliates (collectively, the "Releasing Parties"), hereby fully and completely releases and forever discharges the Indemnified Parties and any other
Person or insurer which may be responsible or liable for the acts or omissions of any of the Indemnified Parties, or who may be liable for the injury or damage resulting therefrom (collectively, with
the Indemnified Parties, the "Released Parties"), of and from any and all actions, causes of action, damages, claims, obligations, liabilities, costs,
expenses and demands of any kind whatsoever, at law or in equity, matured or unmatured, vested or contingent, that any of the Releasing Parties has against any of the Released Parties as of the
Restatement Date. Borrower acknowledges that the foregoing release is a material inducement to Lender's decision to extend to Borrower the financial accommodations hereunder and has been relied upon
by Lender in agreeing to make the Advances. 



 12.12    Agent  




        Lender and its successors and assigns hereby (i) designate and appoint CapitalSource Finance LLC, a Delaware limited liability company, and its successors and
assigns ("CapitalSource"), to act as agent for Lender and its successors and assigns under this Agreement and all other Loan Documents, (ii) irrevocably
authorize CapitalSource to take all actions on its behalf under the provision of this Loan Agreement and all other Loan Documents, and (iii) to exercise all such powers and rights, and to perform all
such duties and obligations hereunder and thereunder. CapitalSource, on behalf of Lender, shall hold all Collateral, payments of principal and interest, fees, charges and collections received pursuant
to this Agreement and all other Loan Documents. Borrower acknowledges that Lender and its successors and assigns transfer and assign to CapitalSource the right to act as Lender's agent to enforce all
rights and perform all obligations of Lender contained herein and in all of the other Loan Documents. Borrower shall within ten (10) Business Days after Lender's reasonable request, take such further
actions, obtain such consents and approvals and duly execute and deliver such further agreements, amendments, assignments, instructions or documents as Lender may request to evidence the appointment
and designation of CapitalSource as agent for Lender and other financial institutions from time to time party hereto and to the other Loan Documents. 


[INTENTIONALLY
LEFT BLANK—SIGNATURE PAGE FOLLOWS] 


45







 
[signature
page to Amended and Restated Revolving Credit and Security Agreement] 



        IN
WITNESS WHEREOF, each of the parties has duly executed this Amended and Restated Revolving Credit and Security Agreement as of the date first written above. 



	 	UNITED STATES PHARMACEUTICAL

GROUP, L.L.C. d/b/a NATIONSHEALTH
	

 	

By:	

    

	 	Name:	    

	 	Its:	    

	

 	
Address for Notices:

13650 N.W. 8th Street

Suite 109

Sunrise, FL 33325
	

 	

Attention: Tim Fairbanks
	 	Telephone:	    

	 	FAX:	    

	

 	
NATIONSHEALTH HOLDINGS, L.L.C.
	

 	

By:	

    

	 	Name:	    

	 	Its:	    

	

 	
Address for Notices:

13650 N.W. 8th Street

Suite 109

Sunrise, FL 33325
	

 	

Attention: Tim Fairbanks
	 	Telephone:	    

	 	FAX:	    

	

 	
CAPITALSOURCE FINANCE LLC
	

 	

By:	

    

	 	Name:	    

	 	Its:	    

	

 	
Address for Notices:

CapitalSource Finance LLC

4445 Willard Avenue, 12th Floor

Chevy Chase, MD 20815

Attention: Healthcare Finance Group, Portfolio Manager

Telephone: (301) 841-2700

FAX: (301) 841-2340




46









 
 

SCHEDULES    
    



	Schedule 2.4	 	—	 	Borrower's Account(s)
	
Schedule 5.2	
 	

—	
 	

Required Consents
	
Schedule 5.3	
 	

—	
 	

Capitalization, Organization Chart (including all subsidiaries, authorized/issued capitalization, owners, directors, officers and managers) and Joint Ventures
	
Schedule 5.4	
 	

—	
 	

Liens; Real and Personal Property Owned or Leased; Leases
	
Schedule 5.5	
 	

—	
 	

Merger Documents
	
Schedule 5.8	
 	

—	
 	

Taxes
	
Schedule 5.11	
 	

—	
 	

Intellectual Property
	
Schedule 5.15A	
 	

—	
 	

Existing Indebtedness
	
Schedule 5.15B	
 	

—	
 	

Indebtedness Maturing During Term
	
Schedule 5.16	
 	

—	
 	

Other Agreements
	
Schedule 5.17	
 	

—	
 	

Insurance
	
Schedule 5.18A	
 	

—	
 	

Corporate Names
	
Schedule 5.18B	
 	

—	
 	

Places of Business; Collateral Location
	
Schedule 5.20	
 	

—	
 	

Inventory Sold or Acquired on Approval or Consignment Basis
	
Schedule 5.23	
 	

—	
 	

Healthtrans Agreement
	
Schedule 6.8	
 	

—	
 	

Further Assurances/Post Closing
	
Schedule 7.2	
 	

—	
 	

Permitted Indebtedness
	
Schedule 7.3	
 	

—	
 	

Permitted Liens










  



 
 

ANNEX I
  FINANCIAL COVENANTS    
    



1)    Minimum EBITDA  


        At not time shall Borrower permit EBITDA to be less than the amounts set forth across from such month or month(s) for the Test Period most recently ended: 



	Test Period Ending
	 	Minimum EBITDA
	 
	May 31, 2004 through July 31, 2004	 	$	(3,100,000	)
	August 31, 2004 through September 30, 2004	 	$	(2,000,000	)
	October 31, 2004 through December 31, 2004	 	$	1,000,000	 
	January 31, 2005 through June 30, 2005	 	$	4,000,000	 
	July 31, 2005 through December 31, 2005	 	$	7,000,000	 
	January 31, 2006 through December 31, 2006	 	$	8,500,000	 
	January 31, 2007 and thereafter	 	$	9,400,000	 






2)    Fixed Charge Coverage Ratio (EBITDA/Fixed Charges)  


        At no time shall Borrower permit Fixed Charge Coverage Ratio to be less than the following as at the end of the following calendar months: 



	Calendar Month Ending
	 	Ratio

	May 31, 2004 through July 31, 2004	 	(8.00) to 1.0
	August 31, 2004 through September 30, 2004	 	(5.00) to 1.0
	October 31, 2004 through December 31, 2004	 	1.00 to 1.0
	January 31, 2005 and thereafter	 	1.50 to 1.0






3)    Cash Velocity  


        Collections of Borrower's Accounts shall not be less than the amount set forth below for each calendar month during the Term; provided,  that upon any violation of or failure to comply with this covenant Lender shall have the right, in its sole discretion, to consider for all purposes under the Agreement as
though Borrower actually collected Accounts equal to such minimum required amount. 



	Calendar Month Ending
	 	Cash Velocity

	May 31, 2004	 	$	3,800,000
	June 30, 2004 through July 31, 2004	 	$	4,600,000
	August 31, 2004 through September 30, 2004	 	$	7,500,000
	October 31, 2004 through December 31, 2004	 	$	9,000,000
	January 31, 2005 through June 30, 2005	 	$	12,000,000
	July 31, 2005 through December 31, 2005	 	$	14,000,000
	January 31, 2006 through December 31, 2006	 	$	16,000,000
	January 31, 2007 and thereafter	 	$	17,500,000





1







 

4)    Minimum Liquidity and Working Capital  


        As of the Restatement Date and at all other times Borrower shall have Available Cash on hand which is not less than the following amounts at all times during the
following time periods during the Term: 



	Time Period
	 	Amount

	Restatement Date through May 31, 2004	 	$	400,000
	June 1, 2004 through July 31, 2004	 	$	700,000
	August 1, 2004 through September 30, 2004	 	$	900,000
	October 31, 2004 and all times thereafter	 	$	1,500,000






        For
purposes of the covenants set forth in this Annex I, the terms listed below shall have the following meanings: 



        "Available Cash" shall mean, for and on any date, the sum without duplication of the following for Borrower: (a) unrestricted cash on hand
on such date, (b) Cash Equivalents held on such date, and (c) the unborrowed Availability on and as of such date. 


        "Cash Equivalents" shall mean (a) securities issued, or directly and fully guaranteed or insured, by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (b)
U.S. dollar denominated time deposits, certificates of deposit and bankers' acceptances of (i) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000,
or (ii) any bank (or the parent company of such bank) whose short-term commercial paper rating from Standard & Poor's Ratings Services ("S&P") is at
least A-2 or the equivalent thereof or from Moody's Investors Service, Inc. ("Moody's") is at least P-2 or the equivalent thereof in each case with
maturities of not more than six months from the date of acquisition (any bank meeting the qualifications specified in clauses (b)(i) or (ii), an "Approved
Bank"), (c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a), above, entered into with any Approved
Bank, (d) commercial paper issued by any Approved Bank or by the parent company of any Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a
short-term commercial paper rating of at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long term
unsecured debt rating of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be, and in each case maturing within six months after the date of acquisition and (e)
investments in money market funds substantially all of whose assets are comprised of securities of the type described in clauses (a) through (d) above. 



        "EBITDA" shall mean, for any Test Period, the sum, without duplication, of the following for Borrower, on a consolidated basis: Net Income
determined in accordance with GAAP, plus, (a) Interest Expense, (b) taxes on income, whether paid, payable or accrued, (c) depreciation expense, (d) amortization expense, (e) all other non-cash,
non-recurring charges and expenses, excluding accruals for cash expenses made in the ordinary course of business, and (f) loss from any sale of assets, other than sales in the ordinary course of
business, all of the foregoing determined in accordance with GAAP, minus (a) gains from any sale of assets, other than sales in the ordinary course of business and (b) other extraordinary or
non-recurring gains. 


        "Fixed Charge Coverage Ratio" shall mean, for Borrower collectively on a consolidated basis, the ratio of (a) EBITDA for the Test Period,
to (b) Fixed Charges for the Test Period. 



2







 




        "Fixed Charges" shall mean, the sum of the following: (a) Total Debt Service, (b) Capital Expenditures, (c) income taxes paid in cash or
accrued, and (d) dividends paid or accrued or declared. 


        "Interest Expense" shall mean, for any Test Period, total interest expense (including attributable to Capital Leases in accordance with
GAAP) fees with respect to all outstanding Indebtedness including capitalized interest but excluding commissions, discounts and other fees owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements. 


        "Interest Rate Agreement" shall mean any interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to
hedge the position with respect to interest rates. 


        "Net Income" shall mean, the net income (or loss) determined in conformity with GAAP, provided that there shall be excluded (i) the income
(or loss) of any Person in which any other Person (other than any Borrower) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to a Borrower by
such Person, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Borrower or is merged into or consolidated with a Borrower or that Person's assets are acquired by a
Borrower, (iii) the income of any Subsidiary of Borrower to the extent that the declaration or payment of dividends or similar distributions of that income by that Subsidiary is not at the time
permitted by operation of the terms of the charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) compensation
expense resulting from the issuance of capital stock, stock options or stock appreciation rights issued to former or current employees, including officers, of a Borrower, or the exercise of such
options or rights, in each case to the extent the obligation (if any) associated therewith is not expected to be settled by the payment of cash by a Borrower or any affiliate thereof, and (v)
compensation expense resulting from the repurchase of capital stock, options and rights described in clause (iv) of this definition of Net Income. 


        "Test Period" shall mean the three most recent calendar months then ended (taken as one accounting period), or such other period as
specified in the Agreement or any Annex thereto (including, for purposes of calculating Enterprise Value as of any date, a trailing twelve month period). 


        "Total Debt Service" shall mean the sum of (i) scheduled or other required payments of principal on Indebtedness, and (ii) Interest
Expense, in each case for such period. 



3








  



 
 

APPENDIX A    
    
    DEFINITIONS    
    



        "Acceptance Notice" shall have the meaning given such term in Section
6.13.


        "Accounts" shall mean all "accounts" (as defined in the UCC) of Borrower (or, if referring to another Person, of such other Person),
including without limitation, accounts, accounts receivables, monies due or to become due and obligations in any form (whether arising in connection with contracts, contract rights, Instruments,
General Intangibles or Chattel Paper), in each case whether arising out of goods sold or services rendered or from any other transaction and whether or not earned by performance, now or hereafter in
existence, and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of any kind, now or hereafter in existence, given by any Person
with respect to any of the foregoing. 


        "Account Debtor" shall mean any Person who is obligated under an Account. 


        "Advance" shall mean a borrowing under the Revolving Facility. Any amounts paid by Lender on behalf of Borrower or any Guarantor under any
Loan Document shall be an Advance for purposes of the Agreement. 


        "Affiliate" shall mean, as to any Person, any other Person (a) that, directly or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, such Person, (b) who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person, or (iii) of any Person described in clause
(a) above with respect to such Person, or (c) which, directly or indirectly through one or more intermediaries, is the beneficial or record owner (as defined in Rule 13d-3 of the Securities Exchange
Act of 1934, as amended, as the same is in effect on the date hereof) of five percent (5%) or more of any class of the outstanding voting stock, securities or other equity or ownership interests of
such Person. For purposes of this definition, the term "control" (and the correlative terms, "controlled by" and "under common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies, whether through ownership of securities or other interests, by contract or otherwise. "Affiliate" shall include any Subsidiary. 


        "Applicable Rate" shall mean the interest rates applicable from time to time to Advances under the Agreement. 


        "Availability" shall have the meaning given such term in Section 2.1(a).



        "Borrowing Base" shall mean, as of any date of determination, the sum of (a) the net collectible U.S. Dollar value of Eligible
Receivables, and (b) the U.S. Dollar Value of Eligible Inventory, as determined with reference to the most recent Borrowing Certificate and otherwise in accordance with this Agreement;  provided, however, that if as of such date the most recent Borrowing Certificate is of a date more than four Business Days before or after such date,
the Borrowing Base shall be determined by Lender in its sole discretion. 


        "Borrowing Certificate" shall mean a Borrowing Certificate substantially in the form of Exhibit
A-1, in the case of Advances, and Exhibit A-2, in the case of Overadvances.


        "Borrowing Date" shall have the meaning given such term in Section 2.4.


        "Business Day" shall mean any day other than a Saturday, Sunday or other day on which the Federal Reserve or Lender is closed. 



        "Capital Expenditures" shall mean, for any Test Period, the sum (without duplication) of all expenditures (whether paid in cash or accrued
as liabilities) during the Test Period that are or should be treated as capital expenditures under GAAP. 


1







 



        "Capital Lease" shall mean, as to any Person, a lease of any interest in any kind of property or asset by that Person as lessee that is,
should be or should have been recorded as a "capital lease" in accordance with GAAP. 


        "Capitalized Lease Obligations" shall mean all obligations of any Person under Capital Leases, in each case, taken at the amount thereof
accounted for as a liability in accordance with GAAP. 


        "Change of Control" shall mean, with respect to any Borrower or Guarantor, the occurrence of any of the following: (i) a merger,
consolidation, reorganization, public offering of securities, recapitalization or share or interest exchange, sale or transfer or any other transaction or series of transactions in which its
stockholders, managers, partners or interest holders immediately prior to such transaction or series of transactions receive, in exchange for the stock or interests owned by them, cash, property or
securities of the resulting or surviving entity or any Affiliate thereof, and, as a result thereof, Persons who, individually or in the aggregate, were holders of 25% (50% following the consummation
of the Merger) or more of its voting stock, securities or equity, partnership or ownership interests immediately prior to such transaction or series of transactions hold less than 25% (50% following
the consummation of the Merger) of the voting stock, securities or other equity, partnership or ownership interests of the resulting or surviving entity or such Affiliate thereof, calculated on a
fully diluted basis, (ii) a direct or indirect sale, transfer or other conveyance or disposition, in any single transaction or series of transactions, of all or substantially all of its assets, or
(iii) any "change in/of control" or "sale" or "disposition" or similar event as defined in any document governing indebtedness of such Person which gives the holder of such indebtedness the right to
accelerate or otherwise require payment of such indebtedness prior to the maturity date thereof. Notwithstanding the foregoing, a Change of Control
shall not include (1) the merger of N Merger L.L.C., a wholly-owned subsidiary of Millstream, with and into NationsHealth Holdings, L.L.C. in accordance with the terms of the Merger Documents, and/or
(2) a Conversion (as defined in Section 9.09 of the Merger Agreement) of RGGPLS Holding, Inc. and/or GRH Holdings, LLC into a Newco (as defined in Section 9.09 of the Merger Agreement) in accordance
with Section 9.09 of the Merger Agreement (the "Merger") so long as: (i) the Merger is consummated under the terms of the Merger Documents as in force
as of March 9, 2004 as amended as of June 2, 2004, (ii) any further modification to the Merger Documents is approved by Lender in its sole discretion, in writing, (iii) MAC, under its new name,
Nationshealth, Inc. joins to this Agreement and becomes a borrower under the applicable Loan Documents and executes all Loan Documents as required by Lender in its Permitted Discretion on or before
the date the Merger is effective, and (iv) Lender received the written legal opinion of counsel for Borrower in form and substance satisfactory to the Lender and its counsel as to certain matters
relating to the Merger, the joinder of MAC and the execution of such Loan Documents. 



        "Charter and Good Standing Documents" shall mean, for each Borrower and Guarantor (i) a copy of the certificate of incorporation or
formation (or other charter document) certified as of a date satisfactory to Lender before the Restatement Date by the applicable Governmental Authority of the jurisdiction of incorporation or
organization of such Borrower and Guarantor, if amended since the Closing Date, (ii) a copy of the bylaws or similar organizational documents certified as of a date satisfactory to Lender before the
Restatement Date by the corporate secretary or assistant secretary of such Borrower and Guarantor, if amended since the Closing Date, (iii) an original certificate of good standing as of a date
acceptable to Lender issued by the applicable Governmental Authority of the jurisdiction of incorporation or organization of such Borrower and Guarantor and of every other jurisdiction in which such
Borrower has an office or conducts business or is otherwise required to be in good standing, and (iv) copies of the resolutions of the Board of Directors or managers (or other applicable governing
body) and, if required, stockholders, members or other equity owners authorizing the execution, delivery and performance of the Loan Documents to which such Borrower and Guarantor is a party,
certified by an authorized officer of such Person as of the Restatement Date. 


2







 



        "Closing" shall mean the satisfaction, or written waiver by Lender, of all of the conditions precedent set forth in the Agreement required
to be satisfied prior to the consummation of the transactions contemplated hereby. 


        "Closing Date" shall mean April 30, 2004. 


        "Collateral" shall have the meaning given such term in Section 2.9.



        "Collateral Patent, Trademark and Copyright Assignment" shall mean any patent, trademark or copyright assignment or acknowledgement
executed by and between Borrower and Lender, as such may be modified, amended or supplemented from time to time. 


        "Collateral Management Fee" shall have the meaning given such term in Section 3.3.


        "Concentration Account" shall have the meaning given such term in Section 2.5.



        "Credit Party" shall have the meaning given such term in Section 6.13.


        "Debtor Relief Law" shall mean, collectively, the Bankruptcy Code of the United States of America and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to time in effect affecting the rights of creditors generally,
as amended from time to time. 



        "Default" shall mean any event, fact, circumstance or condition that, with the giving of applicable notice or passage of time or both,
would constitute or be or result in an Event of Default. 


        "Dilution Items" shall have the meaning given such term in Section 2.1(b).


        "Distribution" shall mean any fee, payment, bonus or other remuneration of any kind, and any repayment of or debt service on loans or
other indebtedness. 


        "Eligible Billed Receivables" shall mean each Account arising in the ordinary course of Borrower's business from the sale of goods or
rendering of Services which Lender, in its sole discretion, deems an Eligible Receivable unless: 



	(a)
	it
is not subject to a valid perfected first priority security interest in favor of Lender, subject to no other Lien;



	(b)
	it
is not evidenced by an invoice, statement or other documentary evidence satisfactory to Lender; provided, that Lender in its sole
discretion may from time to time include as Accounts that are not evidenced by an invoice, statement or other documentary evidence satisfactory to Lender as Eligible Billed Receivables and determine
the advance rate, liquidity factors and reserves applicable to Advances made on any such Accounts;



	(c)
	it
or any portion thereof (in which case only such portion shall not be an Eligible Receivable) is payable by a beneficiary, recipient or subscriber individually and not directly by a
Medicaid/Medicare Account Debtor or commercial medical insurance carrier acceptable to Lender;



	(d)
	it
arises out of services rendered or a sale made to, or out of any other transaction between Borrower or any of its Subsidiaries and, one or more Affiliates of Borrower or any of its
Subsidiaries;



	(e)
	it
remains unpaid for longer than the earlier of (i) 120 calendar days after the first to occur of the claim date or invoice date, and (ii) 135 calendar days after the first to occur
of shipment or delivery of goods;



	(f)
	with
respect to all Accounts owed by any particular Account Debtor (other than Accounts from Medicaid/Medicare Account Debtors) and/or its Affiliates, if more than 50% of the
aggregate balance of all such Accounts owing from such Account Debtor and/or its Affiliates remain unpaid for longer than the earlier of (i) 120 calendar days after the first to occur of 



3







 


the
claim date or invoice date, and (ii) 135 calendar days after the first to occur of shipment or delivery of goods; 



	(g)
	with
respect to all Accounts owed by any particular Account Debtor and/or its Affiliates, 25% or more of all such Accounts are not deemed Eligible Receivables for any reason hereunder
(which percentage may, in Lender's sole discretion, be increased or decreased);



	(h)
	with
respect to all Accounts owed by any particular Account Debtor and/or its Affiliates (except Medicaid/Medicare Account Debtors), if such Accounts exceed 20% of the net collectible
dollar value of all Eligible Receivables at any one time (including Accounts from Medicaid/Medicare Account Debtors) (which percentage may, in Lender's sole discretion, be increased or decreased);



	(i)
	any
covenant, agreement, representation or warranty contained in any Loan Document with respect to such Account has been breached and remains uncured;



	(j)
	the
Account Debtor for such Account has commenced a voluntary case under any Debtor Relief Law or has made an assignment for the benefit of creditors, or a decree or order for relief
has been entered by a court having jurisdiction in respect of such Account Debtor in an involuntary case under any Debtor Relief Law, or any other petition or application for relief under any Debtor
Relief Law has been filed against such Account Debtor, or such Account Debtor has failed, suspended business, ceased to be solvent, called a meeting of its creditors, or has consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its assets or affairs, or Borrower, in the ordinary course of business, should have known of
any of the foregoing;



	(k)
	it
arises from the sale of property or services rendered to one or more Account Debtors outside the continental United States or that have their principal place of business or chief
executive offices outside the continental United States;



	(l)
	it
represents the sale of goods or rendering of services to an Account Debtor on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by Chattel Paper or an Instrument of any kind or has been reduced to judgment;



	(m)
	the
applicable Account Debtor for such Account is any Governmental Authority, unless rights to payment of such Account have been assigned to Lender pursuant to the Assignment of
Claims Act of 1940, as amended (31 U.S.C. Section 3727, et seq. and 41 U.S.C. Section 15, et seq.), or otherwise only if all applicable statutes, regulations and other law respecting the assignment of
Government Accounts have been complied with (for example, with respect to all Accounts payable directly by a Medicaid/Medicare Account Debtor the execution and delivery of a Lockbox Agreement in
appropriate form);



	(n)
	to
the extent that it is subject to any offset, credit (including any resource or other income credit or offset) deduction, defense, discount, chargeback, freight claim, allowance,
adjustment, dispute or counterclaim, or is contingent in any respect or for any reason;



	(o)
	there
is any agreement with an Account Debtor for any deduction from such Account, except for discounts or allowances made in the ordinary course of business for prompt payment, all
of which discounts or allowances are reflected in the calculation of the face value of each invoice related thereto, such that only the discounted amount of such Account after giving effect to such
discounts and allowances shall be considered an Eligible Receivable;



	(p)
	any
return, rejection or repossession of goods or services related to it has occurred;



	(q)
	it
is not payable to Borrower;



	(r)
	Borrower
has agreed to accept or has accepted any non-cash payment for such Account; 



4







 



	(s)
	with
respect to any Account arising from the sale of goods, the goods have not been shipped to the Account Debtor or its designee;



	(t)
	with
respect to any Account arising from the performance of Services, the Services have not been actually performed or the Services were undertaken in violation of any law;



	(u)
	it
is an Account arising under the Wellpoint Agreement in respect of the prescription drug card program until Wellpoint, Borrower and Lender have entered into a tri-party agreement
with respect to Lender's rights in any such Account satisfactory in form and substance to Lender in its sole discretion;



	(v)
	it
is an Account arising under the HealthTrans Agreement with respect to the obligation of HealthTrans for the payment of administrative fees to Borrower which is not paid before the
due date therefore under the HealthTrans Agreement; or



	(w)
	such
Account fails to meet such other specifications and requirements which may from time to time be established by Lender or is not otherwise satisfactory to Lender, as determined in
Lender's sole discretion. 




        "Eligible Deductible Unbilled Receivables" shall mean each Account (other than Eligible Billed Receivables or Eligible Nondeductible
Unbilled Receivables) arising in the ordinary course of Borrower's business from the shipment or delivery of goods which Lender, in its sole discretion, deems an Eligible Deductible Unbilled
Receivable and that otherwise would satisfy the criteria for Eligible Billed Receivables but for the fact that: (i) an invoice has not been rendered to the Account Debtor (due to the fact that the
Borrower has not yet billed the Account Debtor for such receivable as the Account Debtor has not yet reached his/her deductible with Medicare for the applicable deductible period); and (ii) the
Account remains unpaid for no longer than 90 calendar days after the first to occur of shipment or delivery of goods. 


        "Eligible Inventory" shall mean Borrower's saleable Inventory, after taking into account all discounts, which Inventory is maintained in
the ordinary course of Borrower's business which Lender, in its sole discretion, deems Eligible Inventory unless: 



	(a)
	such
Inventory is not subject to a valid perfected first priority security interest in favor of the Lender;



	(b)
	any
consent, license, approval or authorization required to be obtained by Borrower in connection with the granting of a security interest under the Security Documents or in
connection with the manufacture or sale of such Inventory has not been or was not duly obtained and is not in full force and effect;



	(c)
	any
covenant, representation or warranty contained in this Agreement or in any other Loan Document with respect to such Inventory has been breached and remains uncured;



	(d)
	such
Inventory is not owned by Borrower;



	(e)
	such
Inventory does not comply, or was not manufactured in compliance, in all material respects, with all applicable requirements of all statutes, laws, rules, regulations,
ordinances, codes, policies, rules of common law, and the like, now or hereafter in effect, of any Governmental Authority, including any judicial or administrative interpretations thereof, and any
judicial or administrative orders, consents, decrees or judgments;



	(f)
	such
Inventory does not, or at the time of its purchase from the vendor did not, constitute "inventory" under Article 9 of the UCC as then in effect in the jurisdiction whose law
governs perfection of the security interest;



	(g)
	the
Person for whose account such Inventory is being or was produced has commenced a voluntary case under any federal bankruptcy or state or federal insolvency laws or has made an
assignment for the benefit of creditors, or if a decree or order for relief has been entered 



5







 


by
a court having jurisdiction in respect of such Person in an involuntary case under any federal bankruptcy or state or federal insolvency laws, or if any other petition or application for relief
under any federal bankruptcy or state or federal insolvency laws has been filed against such Person, or if such Person has failed, suspended business, ceased to be solvent, called a meeting of its
creditors, or has consented to or suffered a receiver, trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its assets or affairs; 



	(h)
	the
transfer of Inventory to Borrower by vendor, supplier or other Person did not constitute a valid sale and transfer to Borrower of all right, title and interest of such Person in
the inventory enforceable against all creditors of and purchasers from such person;



	(i)
	(A)
Borrower is not the sole owner of all right, title and interest in and to such Inventory, (B) Borrower does not have a valid ownership interest therein free and clear of all Liens
other than Liens granted under the Loan Documents, or (C) any offsets, defenses or counterclaims have been asserted or threatened in writing against such Inventory;



	(j)
	such
Inventory is not in good working order or is damaged;



	(k)
	such
Inventory is not located at a location which is owned by Borrower or subject to a Landlord Waiver and Consent or Warehouseman Waiver and Consent;



	(l)
	such
Inventory consists only of packing materials, displays, supplies, parts or other components or is returned, rejected, repossessed or discontinued product or Inventory;



	(m)
	such
Inventory is subject to a bona fide dispute or is or has been classified as counterfeit or fraudulent;



	(n)
	such
Inventory has been sold, assigned, or otherwise encumbered by Borrower except pursuant to the Loan Documents;



	(o)
	such
Inventory is not associated with a documented purchase order;



	(p)
	such
Inventory consists of equipment that Borrower offers for rental or that is being rented from the Borrower or equipment borrowed by Borrower or given to Borrower to serve as
demonstration equipment;



	(q)
	such
Inventory constitutes custom Inventory, private-label Inventory, raw materials, in process, work-in-process, obsolete or unmerchantable Inventory, Inventory allocated to current
warranty assignments, Inventory that consists of spare parts or Inventory subject to a quality assurance hold:



	(r)
	such
Inventory is in transit;



	(s)
	such
Inventory is (i) not in Borrower's possession and control or (ii) outside the continental United States;



	(t)
	such
Inventory otherwise is not satisfactory to the Lender, as determined in the sole discretion of the Lender. 




        "Eligible Nondeductible Unbilled Receivables" shall mean each Account (other than Eligible Billed Receivables or Eligible Deductible
Unbilled Receivables) arising in the ordinary course of Borrower's business from the shipment or delivery of goods which Lender, in its sole discretion, deems an Eligible Nondeductible Unbilled
Receivable and that otherwise would satisfy the criteria for Eligible Billed Receivables but for the fact that: (i) an invoice has not been rendered to the Account Debtor; (ii) the Account remains
unpaid for no longer than 60 calendar days after the first to occur of shipment or delivery of goods; and (iii) with respect to all Accounts owed by any particular Account Debtor (other than Accounts
from Medicaid/Medicare Account Debtors) and/or its Affiliates, if more than 50% of the aggregate balance of all such Accounts owing from such Account Debtor and/or its Affiliates remain unpaid for no
longer 60 calendar days after the shipment or delivery of goods. 


6







 



        "Eligible Receivables" shall mean, collectively, the Eligible Billed Receivables and Eligible Unbilled Receivables. 



        "Eligible Unbilled Receivables" shall mean, collectively, the Eligible Deductible Unbilled Receivables and Eligible Nondeductible Unbilled
Receivables. 


        "Employee(s)" shall mean, collectively and each individually, Lewis Stone, Robert Gregg and Glenn Parker, M.D. 


        "Employee Subordination Agreement" shall mean, collectively and each individually, each Employee Subordination Agreement to which Lender
and each Employee is a party. 


        "Employment Agreement" shall mean each Employment Agreement made as of March 9, 2004 by and between MAC and each Employee, as such may be
modified, amended or supplemented from time to time. 


        "Enterprise Value" shall mean, as of any date of determination, an amount equal to the greater of (i) six (6) times Borrower's trailing
twelve month EBITDA for the calendar month ending closest to the date of determination or (ii) one (1) times Borrower's net revenue for the trailing twelve months (calculated as of the last day of the
calendar month ending closest to the date of determination). 


        "Environmental Laws" shall mean, collectively and each individually, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendment and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, any other
"Superfund" or "Superlien" law and all other federal, state and local and foreign environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes
relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances, in each
case, as amended, and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of Governmental Authorities with respect thereto. 


        "Equity Participation Fee Agreement" shall mean that certain Equity Participation Fee Agreement by and between Lender and Borrower dated
as of the Restatement Date, as such may be modified, amended or supplemented from time to time. 


        "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder. 



        "Event of Default" shall mean the occurrence of any event set forth in Article VIII.


        "Facility Cap" shall have the meaning given the term in the Recitals of this Agreement. 


        "Fair Valuation" shall mean the determination of the value of the consolidated assets of a Person on the basis of the amount which may be
realized by a willing seller within a reasonable time through collection or sale of such assets at market value on a going concern basis to an interested buyer who is willing to purchase under
ordinary selling conditions in an arm's length transaction. 


        "Finance Fee Payment Date" shall have the meaning given such term in Section 3.1(c).


        "GAAP" shall mean generally accepted accounting principles in the United States of America in effect from time to time as applied by
nationally recognized accounting firms. 


7









   
        "Government Account" shall be defined to mean all Accounts arising out of or with respect to any Government Contract. 


        "Government Contract" shall be defined to mean all contracts with the United States Government or with any agency thereof, and all
amendments thereto. 


        "Governmental Authority" shall mean any federal, state, municipal, national, local or other governmental department, court, commission,
board, bureau, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative or judicial, regulatory or administrative functions of or
pertaining to any government or any court, in each case, whether of the United States or a state, territory or possession thereof, a foreign sovereign entity or country or jurisdiction or the District
of Columbia. 


        "Guarantor" shall mean, collectively and each individually, Robert Gregg, Glenn Parker, Lewis Stone, Michael Gusky, and any and all
guarantors of the Obligations or any part thereof (other than any Employee in respect of any Validity Certificate). 


        "Guaranty" shall mean, collectively and each individually, all guarantees executed by any Guarantors (other than any Validity
Certificate). 


        "Hazardous Substances" shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, hazardous wastes, hazardous or toxic substances or related materials as defined in or
subject to any applicable Environmental Law. 


        "Healthcare Laws" shall mean all applicable statutes, laws, ordinances, rules and regulations of any Governmental Authority with respect
to regulatory matters primarily relating to patient healthcare, healthcare providers and healthcare services (including without limitation Section 1128B(b) of the Social Security Act, as amended, 42
U.S.C. Section 1320a-7(b) (Criminal Penalties Involving Medicare or State Health Care Programs), commonly referred to as the "Federal Anti-Kickback Statute," and the Social Security Act, as amended,
Section 1877, 42 U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly referred to as "Stark Statute"). 


        "HealthTrans" shall mean HealthTran LLC d/b/a HealthTrans. 


        "HealthTrans Agreement" shall mean that certain HealthTrans Master Service Agreement by and between HealthTrans and Borrower dated April
1, 2002. 


        "HeathTrans Triparty Agreement" shall mean that certain agreement entered into between Borrower, Lender and HealthTrans, dated as of the
Closing Date, as such may be modified, amended or supplemented from time to time. 


        "Indebtedness" of any Person shall mean, without duplication, (a) all items which, in accordance with GAAP, would be included in
determining total liabilities as shown on the liability side of the balance sheet of such Person as of the date as of which Indebtedness is to be determined, including any lease which, in accordance
with GAAP would constitute Indebtedness, (b) all indebtedness secured by any mortgage, pledge, security, Lien or conditional sale or other title retention agreement to which any property or asset
owned or held by such Person is subject, whether or not the indebtedness secured thereby shall have been assumed, (c) all indebtedness of others which such Person has directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), discounted or sold with recourse or agreed (contingently or otherwise) to purchase or repurchase or
otherwise acquire, or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock, equity or other ownership interest purchase, capital contribution or
otherwise) or otherwise to become directly or indirectly liable. 


        "Indemnified Person" shall have the meaning given such term in Section 12.4.


8







 



        "Initial Overadvance" or "Initial Overadvances" shall have the meaning given such term in Section
2.1.


        "Initial Overadvance Maturity Date" shall have the meaning given such term in Section 2.2.



        "Insured Event" shall have the meaning given such term in Section 12.4.


        "Insurer" shall mean a Person that insures another Person against any costs incurred in the receipt by such other Person of Services, or
that has an agreement with any Borrower to compensate it for providing Services to such Person. 


        "Inventory" shall mean all "inventory" (as defined in the UCC) of Borrower (or, if referring to another Person, of such other Person), now
owned or hereafter acquired, and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of any kind, now or hereafter in existence,
given by any Person with respect to any of the foregoing. 


        "Landlord Waiver and Consent" shall mean a waiver/consent in form and substance satisfactory to Lender from the owner/lessor of any
premises not owned by Borrower at which any of the Collateral is now or hereafter located for the purpose of providing Lender access to such Collateral, in each case as such may be modified, amended
or supplemented from time to time. 


        "Liability Event" shall mean any event, fact, condition or circumstance or series thereof (i) in or for which any Borrower becomes liable
or otherwise responsible for any amount owed or owing to any Medicaid or Medicare program by a provider under common ownership with such Borrower or any provider owned by such Borrower pursuant to any
applicable law, ordinance, rule, decree, order or regulation of any Governmental Authority after the failure of any such provider to pay any such amount when owed or owing, (ii) in which Medicaid or
Medicare payments to any Borrower are lawfully set-off against payments to such Borrower or any other Borrower to satisfy any liability of or for any amounts owed or owing to any Medicaid or Medicare
program by a provider under common ownership with such Borrower or any provider owned by such Borrower pursuant to any applicable law, ordinance, rule, decree, order or regulation of any Governmental
Authority, or (iii) any of the foregoing under clauses (i) or (ii) in each case pursuant to statutory or regulatory provisions that are similar to any applicable law, ordinance, rule, decree, order or
regulation of any Governmental Authority referenced in clauses (i) and (ii) above or successor provisions thereto. 


        "Lien" shall mean any mortgage, pledge, security interest, encumbrance, restriction, lien or charge of any kind (including any agreement
to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof), or any other arrangement pursuant to which title to the property is retained
by or vested in some other Person for security purposes. 


        "Loan" or "Loans" shall mean, individually and collectively, all Advances under the
Revolving Facility and all Overadvances under the Overadvance Facility. 


        "Loan Documents" shall mean, collectively and each individually, this Agreement, the Original Credit Agreement, the Notes, the Security
Documents, the Guaranties, the Equity Participation Fee Agreement, the Lockbox Agreements, the Uniform Commercial Code Financing Statements, the
HealthTrans Triparty Agreement, the Subordination Agreements, the Landlord Waiver and Consents, the Warehouse Waiver and Consents, the Collateral Patent, Trademark and Copyright Assignment, the
Borrowing Certificates and all other agreements, documents, instruments and certificates heretofore or
hereafter executed or delivered to Lender in connection with any of the foregoing or the Loans, as the same may be amended, modified or supplemented from time to time. 


        "Lockbox Accounts" shall have the meaning given such term in Section 2.5.



        "Lockbox Agreement" shall have the meaning given such term in Section 2.5.


        "Lockbox Bank" shall have the meaning given such term in Section 2.5.


9







 



        "MAC" shall have the meaning given such term in Section 5.5.


        "Management or Service Fee" shall mean any management, service or related or similar fee paid by Borrower to any Person with respect to
any facility owned, operated or leased by Borrower. 


        "Material Adverse Effect" or "Material Adverse Change" shall mean, in the case of Borrower
or any Guarantor, any event, condition or circumstance or set of events, conditions or circumstances or any change(s) which (i) has, had or would reasonably be likely to have any material adverse
effect upon or change in the validity or enforceability of any Loan Document to which such Borrower or Guarantor, as applicable, is a party, (ii) has been or would reasonably be likely to be material
and adverse to the value of any of the Collateral, to the priority of the Lender's security interest in the Collateral, or to the business, operations, prospects, properties, assets, liabilities or
condition of Borrower or Guarantor, as applicable, either individually or taken as a whole, or (iii) has materially impaired or would reasonably be likely to materially impair the ability of any
Borrower or Guarantor to pay any portion of the Obligations or to otherwise perform the Obligations or to consummate the transactions under the Loan Documents executed by such Person. 



        "Medicaid/Medicare Account Debtor" shall mean any Account Debtor which is (i) the United States of America acting under the Medicaid or
Medicare program established pursuant to the Social Security Act or any other federal healthcare program, including, without limitation, TRICARE (f/k/a CHAMPUS), (ii) any state or the District of
Columbia acting pursuant to a health plan adopted pursuant to Title XIX of the Social Security Act or any other state health care program, or (iii) any agent, carrier, administrator or intermediary
for any of the foregoing. 


        "Merger" shall have the meaning given such term in the definition of the term "Change in Control." 



        "Merger Agreement" shall have the meaning given such term in Section 5.5.


        "Merger Documents" shall have the meaning given such term in Section 5.5.


        "Millstream" shall have the meaning given such term in Section 5.5.


        "Minimum Termination Fee" shall mean (for the time period indicated) the amount equal to (i) 3% of the Facility Cap if the date of notice
of such termination by Borrower is after the first anniversary date of the Closing Date but prior to the second anniversary of the Closing Date, and (ii) 2% of the Facility Cap if the date of notice
of such termination by Borrower is on or after the second anniversary of the Closing Date. 


        "Note" shall mean, collectively and each individually, the promissory note(s) payable to the order of Lender executed by Borrower
evidencing the Revolving Facility and the Overadvance Facility, as the same may be modified, amended or supplemented from time to time. 


        "Obligations" shall mean all present and future obligations, Indebtedness and liabilities of Borrower and/or Guarantors to Lender at any
time and from time to time of every kind, nature and description, direct or indirect, secured or unsecured, joint and several, absolute or contingent, due or to become due, matured or unmatured, now
existing or hereafter arising, contractual or tortious, liquidated or unliquidated, under any of the Loan Documents (including the Equity Participation Fee Agreement) or otherwise relating to the Note
and/or Loans, including, without limitation, all applicable fees, charges and expenses and/or all amounts paid or advanced by Lender on behalf of or for the benefit of any Borrower and/or Guarantor
for any reason at any time, including in each case obligations of performance as well as obligations of payment and interest that accrue after the commencement of any proceeding under any Debtor
Relief Law by or against any such Person. 


        "Offer" shall have the meaning given such term in Section 6.13.


        "Option Period" shall have the meaning given such term in Section 6.13.


10







 



        "Original Credit Agreement" shall have the meaning given such term in the Preamble hereof. 


        "Overadvance Facility" shall have the meaning given such term in the Preamble hereof. 


        "Overadvance Facility Cap" shall have the meaning given such term in the Preamble hereof. 


        "Overadvances" shall have the meaning given such term in Section 2.1.



        "Overadvance Note" shall mean, collectively and each individually, the promissory note(s) payable to the order of Lender executed by
Borrower evidencing the Overadvance Facility, as the same may be modified, amended or supplemented from time to time. 


        "Payment Office" shall mean initially the address set forth beneath Lender's name on the signature page of the Agreement, and thereafter,
such other office of Lender, if any, which it may designate by notice to Borrower to be the Payment Office. 



        "Permit" shall mean collectively all licenses, leases, powers, permits, franchises, certificates, authorizations, approvals, certificates
of need, provider numbers and other rights. 


        "Permitted Discretion" shall mean a determination or judgment made by Lender in good faith in the exercise of reasonable (from the
perspective of a secured lender) business judgment. 


        "Permitted Indebtedness" shall have the meaning given such term in Section 7.2.



        "Permitted Liens" shall have the meaning given such term in Section 7.3.


        "Permitted Subordinated Debt" shall mean indebtedness incurred by Borrower to which is subordinated to Borrower's indebtedness owed to
Lender pursuant to a written agreement approved by Lender in writing . 


        "Person" shall mean an individual, a partnership, a corporation, a limited liability company, a business trust, a joint stock company, a
trust, an unincorporated association, a joint venture, a Governmental Authority or any other entity of whatever nature. 



        "Prime Rate" shall mean a fluctuating interest rate per annum equal at all times to the rate of interest announced publicly from time to
time by Citibank, N.A. as its base rate; provided, that such rate is not necessarily the best rate offered to its customers, and, should Lender be unable to determine such rate, such other indication
of the prevailing prime rate of interest as may reasonably be chosen by Lender; provided, that each change in the fluctuating interest rate shall take effect simultaneously with the corresponding
change in the Prime Rate. 


        "Receipt" shall have the meaning given such term in Section 12.5.



        "Released Parties" shall have the meaning given such term in Section 12.11.


        "Releasing Parties" shall have the meaning given such term in Section 12.11.


        "Restatement Date" shall mean the date of this Agreement. 


        "Revolver Termination" shall have the meaning given such term in Section 11.1(b).



        "Revolving Facility Maturity Date" shall have the meaning assigned to such term in Section
2.2(b).


        "Revolving Note" shall mean, collectively and each individually, the promissory note(s) payable to the order of Lender executed by
Borrower evidencing the Revolving Facility, as the same may be modified, amended or supplemented from time to time. 


        "Security Documents" shall mean the Note, this Agreement, the Original Credit Agreement, Guaranties, Collateral Patent, Trademark and
Copyright Assignment, Lockbox Agreements, Uniform Commercial Code Financing Statements and all other documents or instruments necessary to create or 


11







 



perfect
the Liens in the Collateral, as such may be modified, amended or supplemented from time to time. 


        "Selling Shareholder(s)" shall have the meaning given such term in Section 5.5.



        "Services" shall mean medical and health care services provided to a Person, including, but not limited to, medical and health care
services which are covered by a policy of insurance issued by an Insurer, physician services, nurse and therapist services, dental services, hospital services, skilled nursing facility services,
comprehensive outpatient rehabilitation services, home health care services, residential and out-patient behavioral healthcare services. 


        "Solvency Certificate" shall have the meaning given such term in Section 4.1(d).



        "Subordination Agreement" shall mean, collectively and each individually, the Employee Subordination Agreement and each other
subordination agreement to which Lender and other service providers, employees or creditors of any Borrower are a party. 


        "Subsequent Overadvance" or "Subsequent Overadvances" shall have the meaning given such
term in Section 2.2 hereof. 



        "Subsequent Overadvance Maturity Date" shall have the meaning given such term in Section
2.2 hereof. 


        "Subsidiary" shall mean, (i) as to Borrower, any Person in which more than 50% of all equity, membership, partnership or other ownership
interests is owned directly or indirectly by Borrower or one or more of its Subsidiaries, and (ii) as to any other Person, any Person in which more than 50% of all equity, membership, partnership or
other ownership interests is owned directly or indirectly by such Person or by one or more of such Person's Subsidiaries. 



        "Tax Distributions" means, as to Borrower, the aggregate distributions from Borrower to its members to permit such members (and in the
case of any member that is a partnership, S corporation or other
flow-through entity for federal tax purposes, the beneficial owners of such entity) to pay taxes on their allocable share of the taxable income of Borrower, including any income allocated to a member
pursuant to Section 704(c) of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, and determined (i) taking into account the principles of Section 754
of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder and (ii) in an amount equal to the estimated tax liability of each member on the income of
Borrower allocable to such member computed at the highest marginal federal and state rate applicable to such member or, in the case of a member that itself is a pass-through entity, at the highest
marginal rates applicable to its owners; provided, however, that the amount of such distributions in any fiscal year shall not exceed the lesser of (x) the actual tax liability incurred by the members
from the Borrower's operations, or (y) twenty-five percent (25%) of Borrower's net income from the preceding fiscal year. 


        "Term" shall mean the period commencing on the date set forth on the first page hereof and ending on the date that is three (3) years
after the Closing Date. 


        "Termination Date" shall have the meaning given such term in Section 11.1.


        "Transferee" shall have the meaning given such term in Section 12.2.


        "Transaction" shall have the meaning given such term in Section 6.13.



        "UCC" shall mean the Uniform Commercial Code as in effect in the State of Maryland from time to time. 


        "Unused Line Fee" shall have the meaning given such term in Section 3.2.


12







 



        "Validity Certificate" shall mean each certificate of validity executed by an Employee on the Closing Date in substantially the form of  Exhibit B. 


        "Warehouse Waiver and Consent" shall mean a waiver/consent in form and substance satisfactory to Lender from any warehouseman, fulfillment
house or other person owning a facility not owned by Borrower at which any Inventory is now or hereafter located for the purpose of providing Lender
access to such Inventory, in each case as such may be modified, amended or supplemented from time to time. 



        "Wellpoint" shall mean Professional Claim Services, Inc. d/b/a Wellpoint Pharmacy Management, a New York Corporation. 


        "Wellpoint Agreement" shall mean that certain Service Agreement dated March 30, 2004 by and between Borrower and Wellpoint. 


13











QuickLinks



Exhibit 10.17



REVOLVING CREDIT AGREEMENT TABLE OF CONTENTS




Execution Document


AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT



SCHEDULES


ANNEX I FINANCIAL COVENANTS


APPENDIX A DEFINITIONS